Generally, I stay away from nonprofit CEO salary issues. My general belief is that CEO salaries are up to the Board and it is on them to understand what is reasonable within a given field and what is necessary to attract the talent they need for the job at hand. I must however admit a certain prejudice against salaries typically paid hospital and university CEO's, maybe more because I don't quite get why these institutions are nonprofits based on their "charitable records".
Enter the nonprofit insurers. One in particular, Horizon Blue Cross Blue Shield paid its CEO $8.71 million last year. This pay reflected a 59% increase. And, according to the Philadelphia Inquirer, "U.S. Sen. Frank Lautenberg (D., N.J.) has asked the IRS to investigate whether the $8.71 million paid last year to William Marino, chief executive officer of Horizon Blue Cross Blue Shield of New Jersey, the state's largest health insurer, qualifies as "reasonable" under the tax law regarding nonprofits."
So now we must ask a more fundamental question: what is reasonable pay? Should "reasonable" be applied to Horizon as a nonprofit or as the largest health insurer? We can compare with nonprofit salaries and except maybe for hospitals or universities find that this is indeed a pretty high salary. But we can also compare Horizon's salary with what other insurers are paying to attract and retain their talent. I'm going to guess that they maybe pay the same if not more and may even be smaller insurers.
But maybe Horizon's CEO salary is serving more as a weather vane raising a very valid question as to how charitable Horizon really is. Putting aside the crude expectations by the public that nonprofit CEO's should work for peanuts, I believe a more appropriate expectation is to have nonprofits like Horizon demonstrate their charitability -- in essence, defend their nonprofit status. My advice to Senator Lautenberg: don't focus on CEO salary, you may find that comparably, it's reasonable. Focus instead on the charitability of Horizon. That is a very valid focus.