Charity CEO pay could be only 0.05% of the charity's total income
NOTE: This post was written in summer 2014, but its message may be relevant time and time again, so I may refer back to it. The key stat is that for the largest 10 charities in the UK, CEO pay was 0.05% of the total income, so if you're donating to make a difference, focus your attention on how much impact the charity makes, not how much the CEO earns.
While the topic of charity executive pay may seem a bit old, it's timely just now because the deadline for the Charity Commission's consultation about the Annual return is 12th August 2014.
I suspect that charity exec remuneration is at the heart of it all, so I'm going to present some brand new figures that put the whole issue in perspective.
People are clearly caught up with the topic of charity CEO pay
There's no doubt that charity exec remuneration has received plenty of negative attention, especially in the summer of 2013.The Daily Mail has had plenty to say on the topic, including this article criticising charities whose CEOs earn more than £100k, and this article criticising the £234k salary of the highest-paid employee of Save the Children, or this cartoon (left), with the caption "Be patient, baby. There are top charity executives first in the queue" (Sorry the image is small, I've put a larger version at the bottom of this post)
Also, the Commission's consultation is (roughly) in line with NCVO recommendations.
Are people right to criticise fat-cat charity chiefs?
Much ink has been spilled on this, and much soul-searching done about whether working for a charity should be an underpaid vocation or not, and I don't blame a Guardian commentator for having a profound identity crisis on the topic.
Opinion is still split:- Some argue that charity bosses shouldn't need to be paid so much.
- Others argue that moderately high remuneration is needed to attract talent.
I'm not going to argue directly for one view or the other, although I will note that those who think that charity bosses should be paid at a discount should be happy, because NCVO found that charity leaders receive "between 25% and 45% less pay than they could command elsewhere". Instead I'm going to suggest that we are losing sight of the important thing here - charities should be about their beneficiaries and their impact, not their staff. So here's the really important question:
Does CEO pay matter? (Given that it's often way less than 1% of total income, the answer is no)
In a sense every bit of spend matters, but to get a sense of materiality, I thought I would gather some data. As you will see from the below, CEO pay is really not large enough to warrant all this attention:
- For the largest 10 charities in the UK, CEO pay was 0.05% of the charity's total income
- For the 12 charities with the strongest brand, CEO pay was 0.09% of the charity's total income
- For Save the Children (excoriated by the Daily Mail) CEO pay was 0.06% of the charity's total income
- For the Red Cross (also named by the Daily Mail) CEO pay was 0.08% of the charity's total income
- Across all the 23 charities I analysed here, all of them had CEO pay below 0.3% of total income, and the vast majority had CEO pay below 0.15% of total income.
These are small numbers!So if we were to realise that charities were doing the wrong thing, and actually CEOs should be paid half as much, or even 80% less, it still wouldn't make much difference.
This could support Stephen Bubb's (Chief exec of ACEVO) claim that this is a disgraceful distraction.
So let's keep a clear head and focus on the impact, because that's what really matters.
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Slightly more detailed notes on CEO pay vs total income ratios (for nitpickers):
Some will point out that I've focused on the larger charities here, which is going to skew the figures downwards. However the figures quoted above are so small that they could be substantially increased and still remain below 1%. Note also that if we go down to the smaller charities, we may see some with total income of c £500k and CEO salary of c £50k-£60k (this is broadly consistent with my experience - sorry no data on this). While this is much more than 10%, I think most agree that it's a fair wage for an important role. If you still want more detail, I have copied and pasted the full calcs to the bottom of this post. It looks a bit messy, but if I can find a way of attaching the spreadsheet, I will (or I can send it to you on request)
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Interesting further reading:
http://www.ncvo.org.uk/images/documents/about_us/our-finances-and-pay/Executive_Pay_Report.pdf (note re charity leaders receiving between 25% and 45% less than their peers in other industries is on p4)
http://www.thirdsector.co.uk/analysis-fat-cats-bigger-picture-senior-salaries/management/article/1224165
http://www.theguardian.com/commentisfree/2013/aug/08/pay-charity-bosses-ngo-executives?INTCMP=SRCH
http://www.theguardian.com/voluntary-sector-network/2014/may/13/successful-charities-should-pay-executives-well
http://www.theguardian.com/voluntary-sector-network/2013/nov/11/mencap-chief-executive-defends-salary
http://www.theguardian.com/voluntary-sector-network/2013/aug/06/charity-fat-cats-paid-too-much
http://www.charitywatch.org/articles/salaries.html
http://nfpsynergy.net/chiefconcern-blog
http://www.thisiszone.com/news/charity-chiefs-pay-is-the-wrong-debate/
http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong
http://bloggerbubb.blogspot.com/2013/08/charity-pay-critics.html
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That cartoon from the Daily Mail that was too small to view further up in this post:
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Detailed calcs of CEO pay / total income
The top charities can be found by going to http://www.charitycommission.gov.uk/find-charities/ and clicking on "Top 10 charities"
Show charities by:
Show/Hide column selection| Charity name | Total income £000 | |
|---|---|---|
| 1 | LLOYD`S REGISTER FOUNDATION | 951,392 |
| 2 | THE BRITISH COUNCIL | 781,289 |
| 3 | THE ARTS COUNCIL OF ENGLAND | 746,425 |
| 4 | CANAL & RIVER TRUST | 680,500 |
| 5 | NUFFIELD HEALTH | 661,600 |
| 6 | CANCER RESEARCH UK | 536,557 |
| 7 | THE NATIONAL TRUST FOR PLACES OF HISTORIC INTEREST OR NATURAL BEAUTY | 456,926 |
| 8 | CARDIFF UNIVERSITY | 436,685 |
| 9 | THE CHARITIES AID FOUNDATION | 384,747 |
| 10 | OXFAM | 367,900 |
| Total | 6,004,021 |
I had to exclude these two from the calcs:
LLOYD`S REGISTER FOUNDATION: Excluded because when I went to the accounts it gave the total income as £14m, which seems to be at odds with the £951m shown in the Charity Commission figures, suggesting there is some anomaly somewhere.
THE CHARITIES AID FOUNDATION: Excluded. Interestingly, the CEO of CAF criticised the sector for not defending its decisions on CEO pay but I looked in their 2013 accounts and couldn't find any info on their own CEO pay!
| 1 | Lloyds register foundation | - | - | I've excluded this because the accounts didn't seem to match up with Charity Commission figures, so I'm not sure what's going on here (http://www.lrfoundation.org.uk/images/6454-lloyds-register-foundation-review-2013.pdf) | |
| 2 | British Council | 195 | 781,289 | 0.02% | Source: Annual report and accounts |
| 3 | Arts council of England | 187 | 746425 | 0.03% | Source: Annual report and accounts |
| 4 | Canal and River trust | 155 | 680500 | 0.02% | Source: Annual report and accounts |
| 5 | Nuffield Health | 775 | 661600 | 0.12% | Source: Annual report and accounts |
| 6 | Cancer research UK | 225 | 536557 | 0.04% | Source: Annual report and accounts |
| 7 | National Trust | - | - | - | I've excluded this because I couldn't find any remuneration info in the accounts |
| 8 | Cardiff university | 255 | 436685 | 0.06% | Source: Annual report and accounts |
| 9 | Charities Aid Foundation | - | - | - | Interestingly, the CEO of CAF criticised the sector for not defending its decisions on CEO pay (http://www.charitytimes.com/ct/February_March_2014_Trustees_CEO_Pay) but I looked in their accounts (https://www.cafonline.org/pdf/CAF_Bank_Annual_Report_2013.pdf) and couldn't find any info on CEO pay! |
| 10 | Oxfam | 133.464 | 367900 | 0.04% | Source: Annual report and accounts |
| Aggregated figures | 1925.575 | 4210956 | 0.05% |
The list of the charities with the largest brand is here:
http://www.thirdsectorresearch.com/cms-assets/documents/79637-240903.brandindex2012-top105.pdf
I had to use the 2012 list because you have to pay for the 2013 list.
| 1 | Cancer research UK | 225 | 536557 | 0.04% | Source: Annual report and accounts |
| 2 | Macmillan cancer support | 175 | 189709 | 0.09% | Source: Annual report and accounts |
| 3 | Royal British Legion / Poppy Appeal | 145 | 124558 | 0.12% | Source: Annual report and accounts |
| 4 | BBC Children in Need | 100 | 50907 | 0.20% | Source: Annual report and accounts. Note that the CEO pay is annualised, but the total income is for 9 months. I thought Children in Need's income might be seasonal, so I didn't annualise. |
| 5 | Comic Relief / Sport Relief / Red Nose Day | 132 | 114167 | 0.12% | Source: Annual report and accounts |
| 6 | British Heart Foundation | 173 | 263607 | 0.07% | Source: Annual report and accounts |
| 7 | St John Ambulance | 145 | 90581 | 0.16% | Source: Annual report and accounts |
| 8 | Red Cross | 184 | 228400 | 0.08% | Source for total income is annual report (http://www.redcross.org.uk/~/media/BritishRedCross/Documents/About%20us/Trustees%20Report%20and%20Accounts%202013.pdf) Source for CEO pay is Daily Mail (http://www.dailymail.co.uk/news/article-2385754/Fury-charity-boss-says-donors-dont-mind-paying-figure-salaries.html) |
| 9 | Help for Heroes | 95 | 33914 | 0.28% | Source: Annual report and accounts |
| 10 | RSPCA | 145 | 121245 | 0.12% | Source: Annual report and accounts |
| 11 | Marie Curie Cancer Care | 165 | 148952 | 0.11% | Source: Annual report and accounts |
| 12 | NSPCC / ChildLine | 165 | 129432 | 0.13% | Source: Annual report and accounts |
| 13 | Great Ormond Street Hospital Children’s Charity | I had a look in the annual report (http://www.gosh.nhs.uk/about-us/our-corporate-information/publications-and-reports/annual-reports/) but oculdn't find the ceo salary | |||
| Aggregated figures | 1850 | 2032029 | 0.09% |
The source of the CEO salary is largely the annual report.
In some cases the annual report didn't specify whether the largest salary was the CEO salary, so I just assumed that this was the case if necessary.
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Information taken from http://www.charitycommission.gov.uk/about-charities/sector-facts-and-figures/
Sector facts and figures
30th June 2014
Annual income bracket
|
Number of charities
|
%
|
Annual income £bn
|
%
|
| £0 to £10,000 |
68,550
|
41.7
|
0.228
|
0.4
|
| £10,001 to £100,000 |
54,964
|
33.4
|
1.934
|
3.0
|
| £100,001 to £500,000 |
20,871
|
12.7
|
4.609
|
7.3
|
| £500,001 to £5,000,000 |
8,302
|
5.1
|
12.502
|
19.7
|
| £5,000,000 plus |
1,976
|
1.2
|
44.165
|
69.6
|
| SUB-TOTAL |
154,663
|
94.1
|
63.438
|
100.0
|
| Not yet known |
9,682
|
5.9
|
0.000
|
0.0
|
| TOTAL |
164,345
|
100.0
|
63.438
|
100.0
|
- See more at: http://www.charitycommission.gov.uk/about-charities/sector-facts-and-figures/#sthash.wiGtQJBq.dpuf
Attempt at calculations of average CEO pay divided by total income for whole charity sector:
I did try to calculate the figures of CEO pay divided by total income for the whole sector, but ended up not including them in the article. For transparency, here's my attempt, and why decided not to include it:
Annual income is £63.4bn for 154,663 charities (Source: Charity Commission, or see the table copied immediately above)
This comes to an average of £410k income per charity
Average CEO pay is £58,000 (Source: Daily Mail)
Which suggests that 14% of total income goes to CEOs.
I'm worried that the CEO pay figure is potentially inconsistent with the £410k, which would make a nonsense of the 14% figure.
In particular, given that most charities actually have no staff at all (according to the aforementioned NCVO report, it's actually 91% of charities that have no staff) I would assume that they are excluded from the charities that make up the £58k average (but I can't be sure of that). The £140k per charity average income does include all charities though, including those with no staff.
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In case you're interested in the Charity Commission consultation I referred to at the start of the post:
From: http://www.charitycommission.gov.uk/about-the-commission/our-research/our-consultations/annual-return-for-2015-information-collected-from-charities/proposals-for-the-annual-return-for-2015/
| Q1 Do you agree with the proposal to introduce a question into the annual return to ask how much of a charity's total expenditure has been on campaigning activities? |
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Q2 Do you agree with the proposal to introduce a question to the annual return to ask how much of a charity's income was received from:
|
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| Q3 If we did introduce the questions set out above is it feasible for charities to provide this information for the annual return for 2015, or should we wait to introduce the question in the annual return for 2016? |
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| Q4 Do you agree with the proposal to ask whether a charity has a written policy on remuneration of executive staff? |
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| Q5 Do you agree with the proposal to introduce a question into the annual return for 2015 to ask if a charity has carried out a review of its financial controls during the reporting year? |
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| Q6 Do you agree with the proposal to ask charities with incomes of between £10,000 and £500,000 to provide some key financial information through the annual return? |
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