Giving to charities and excessive(?) pay to their execs

There is some furore in the press today about the number of charities paying individual members of staff over £100,000 a year. The original report is in the Telegraph but since that’s behind a semi paywall now, I’ve read the Independent’s report.

Many people will justifiably be concerned that their donations are going towards an excessive remuneration package (salary, plus pension, car benefits, private medical etc) for a few individuals and not the front line action they thought they were supporting.

In many ways the arguments the charities will put forward will not be unfamiliar to anyone who worked in local government in the early 90’s when top executive salaries went through the roof as ideology drove councils to pay “commercial salaries” to attract the “best talent” from the private sector. That had depressingly obvious results and I fear that the award of such enormous salaries may also affect charities negatively.

Just to see how bad the problem was/is, I had a look at the NSPCC’s accounts from 2008 and 2012. If you didn’t know, the Charity Commission’s website is an excellent resource for finding out about charities. Not only does it make their accounts available for download, it also provides analysis of the data too. Back in 2008 the NSPCC had 24 employees earning £60,000 or more. Now it has 49 (note 8 to the accounts). In 2008 it had 3 employees on over £100,000, now it has 7. To put that in context, the company’s income is over £136m (£114m charitable donations) for the year to March 2012.

Looking at a smaller charity I give to, The Lymphoma Association, their income is only £1.3m and no employee was remunerated more than £60,000.

What it comes down to is scale. Is it more complicated to run a charity that is national and has income of over £100m than it is to run a charity that is national but has income of 1% of that total? The answer is probably.

In my day job as an auditor I see companies with turnovers under £10m that are orders of magnitude more complicated to run than businesses that turn over £100’s of millions. “Governance” and regulation are likely to be more complex with a bigger charity but at some level you have to question the motivation of the executives of these charities that make mega payouts to top employees. When I watch one of the harrowing adverts of child neglect from the NSPCC, do I find myself thinking that 7 members of staff cost the charity about £825,000 a year? Yes I do, and I have to admit I resent the NSPCC for that, even given the undoubted arguments about paying for the expertise of top management.

In my view, top quality management is about having the skill set and the empathy to know that excessive remuneration is not acceptable.

I don’t expect people to work for free at the top end of large charities. They have families to support and the skill set for running any organisation of this size well is pretty formidable. And yes, in the private sector they would be remunerated as well if not better (£136m isn’t a huge amount of turnover in the context of commercial companies) but their motivation for working in the charity sector shouldn’t be the number of zeroes on their pay cheque.

I don’t mean to single out the NSPCC individually here, they just happened to be the first charity I looked at. Probably because their name is quick to type.