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What the CEO salary debate is telling us

Peter Lewis reflects on the CEO salary debate


If youíve been keeping up with charity news this summer and autumn, thereís one story that wonít have passed you by Ė the charity CEO salary debate.

Iíve worked in the public, private and third sector, and the charitable one is by far the most complex in which to deliver. In the private sector, you just have to deliver profit. In the public sector, you just have to make the right policy decisions to raise and spend taxes. And for the most part, as a civil servant, your work focuses on spending public money, not raising it.

In the charitable world, however, the CEO has a more complex role. The focus would appear to be simple: how best to deliver the charityís objectives and meet the needs of more beneficiaries? But the complexities are multiple.

Sure, you can invest some of your funds to raise more funds (and you, of course, have to invest to fundraise effectively). But can you spend all that hard-won cash effectively? No one likes a charity with fat reserves. Then again, you also need a certain amount of reserves for difficult times, such as these, when raising funds may be more difficult.

And should you then spend those funds campaigning for policy change from government that could lead to a systemic improvement to your beneficiariesí circumstances? Or should you just meet the needs of those people by providing services? Or should you do a mixture of both?

This is complex even in a small organisation. In a large, multinational NGO delivering services domestically and abroad, reacting quickly to emergencies, endeavouring to change policy as well as delivering services, and turning over several hundred million pounds a year, itís a mammoth task. Might a board of trustees be right in deciding to pay their CEO over £100k to do it? If thatís what it takes to get the best leader for their charity, and to be the most effective organisation for their beneficiaries, then, yes, I think so.


Balancing act

There are caveats, however. One of the biggest challenges facing our society is income inequality. It is huge in the UK, and growing. Surely the charity sector should lead the charge against income inequality. That means being responsible with top salaries as well as making sure everyone who works for your charity, or for one of its suppliers, earns a living wage.

Iím sure that many of us have felt slightly awkward about some of the salaries that have come into the public domain recently. Rather than turn our eyes away, we should be brave enough to address such instances. Perhaps the NCVO Executive Pay Inquiry will help us do this.

The story has also brought into sharp relief the gap between the reality of how some large, modern charities work, and the expectations of some of the public (including some donors) about how they think they work.


Show and tell

The message for us as a sector is simple: we need to get better not just at engaging the public emotionally in our causes, not just at communicating our impact, but at ensuring the public understand how we work. We need to get to a position where donors and the public understand that, even when the average income is under £26k and only the top 10 per cent earn over £45k, it might still be absolutely right for the CEO of a top charity to earn over £100k and be among the top one per cent of earners in the country.

Perhaps the final lesson from this debate is that we need to spend a bit more time explaining both the complexity of what we do and how we do it, the need for effective and efficient leadership and management, and the need for skilled professional staff working alongside our volunteers, enabling us to achieve all the great things we do to make the world a better place.

Should we continue to tell stories, connect emotionally and show impact? Of course. But we should also explain more about how we actually do it.
Peter Lewis is chief executive of the Institute of Fundraising


This article first appeared in The Fundraiser magazine, Issue 35, November 2013

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