From the recent activity in New Jersey, it looks like the debate over what is "appropriate" compensation for a nonprofit executive is going to be raised to a new level. I want to first assert before describing what I believe may become a call for action by boards and execs alike is that I firmly believe that nonprofit exec compensation should be soley in the hands of a nonprofit's board.
That said, according to the March/April 2011 Taxation of Exempts (sorry, you can't get this on-line) has chronicled a recent move in the State of New Jersey by two social services departments to specify in the standard contract limits on the amount of an executive's salary that may be paid by grants. Specifically:
Full-time Salary Compensation Limitation. No monies under the contract shall be paid to the Provider Agnecy for costs of any individual salary (including bonuses) to be paid to any of the Provider Agency's full-time employees (excluding Physician and Advanced Practice Nurses) in excess of the following schedule (which varies with gross revenue for the entire organization):
a) over $20 million -- $141,000; b) Over $10 million but less than or equal to $20 million the limitation shall equal 90% of the benchmark salary ($141,000) -- $126,900; c) Over $5 million, but less than or equal to $10 million the limitation shall equal 85% of the benchmark salary or $119,850.
And just a reminder that the US Congress in Section 4958 already has excess benefit provision with penalties.
Now, how successful do you think these governments would be at taking these approaches with the for-profit sector?