Charity bosses are the latest group of workers to have the
salary spotlight trained upon them. A number of newspapers have
picked up on a report undertaken by the Telegraph relating to
salaries received by chief executives at a number of well-known
charity organisations. The article focused on comments by William
Shawcross, Chair of the Charity Commission, suggesting that there
is a danger the third sector will be brought into disrepute by what
might be perceived as a City-style approach to remuneration.
This is the latest instalment in a very public debate on pay. The
recent banking crisis has triggered a widespread and genuine bout
of soul-searching by the public and the media with regard to
salaries. How much should one be paid? Should salaries be
commensurate with results or pegged to some other measure, such as
corporate performance or average salaries? Essentially, are people
really worth the sometimes gargantuan salaries which they
receive?
It is unsurprising that there is simmering discontent about
salaries in the financial services sector, given that many do not
understand the often complex instruments traded by those who earn
the most. It is also true that there is often an immense disparity
between top and bottom earners in banks. The answer to such public
discontent given by banks and politicians has been, and remains,
that talent costs money and failing to lure able and inspirational
professionals with favourable terms of employment would cause
irreparable damage to balance sheets and the interests of
shareholders. It is an uncomfortable argument to put forward, but
it is one which appears to have been grudgingly accepted, at least
in political circles.
So, why should the 'banking' argument not also hold for
salaries paid to top charity executives? The charity sector is, of
course, more emotive and is ostensibly driven by altruism rather
than financial reward. One of the main goals, if not the only one,
is to accumulate as much as possible in the way of funds to then
distribute in as efficient and fair a way as possible. In general,
charity staff are or should be driven by considerations which are
separate from financial reward. Without doubt a few eyebrows may
have been raised among the public on learning that those who direct
the organisations to which they donate receive seemingly generous
salaries sometimes in excess of £100,000. Such funds could,
theoretically at least, be earmarked for distribution in accordance
with a charity's underlying aims, but are being paid into the
pockets of those tasked with looking after its financial
health.
However, whilst it is true that workers in this sector are
generally motivated by an identification with the aims of the
charity for which they work, it is undoubtedly still difficult for
charities to attract top professionals. Although it is of course
desirable that charities should be able to harness such expertise
at the lowest possible cost, the reality is that they operate
within a market economy in which they must compete for talent with
the entire range of corporate and commercial organisations, many of
which are capable of offering extremely tempting remuneration
packages.
Charity trustees are appointed to protect the interests of the
charity and administer the funds at their disposal in such a way as
to ensure the long-term financial health of the organisation. To do
so, they need to put in place a management structure capable of
safeguarding those long-term interests, comprising experienced
professionals who understand the sector-specific demands of
fundraising and have the requisite leadership skills. Seen against
that backdrop, paying higher salaries, albeit within reasonable
limits, is a simple reality for charities wishing to attract and
retain chief executives capable of bringing real benefit.
It is also worth considering the sheer amount of donations some of
the leading charities process on a yearly basis, running into tens
and even hundreds of millions of pounds, amounts which far outstrip
many corporations who often pay their top management far in excess
of their charity counterparts. Within such a context, it is
debatable whether six-figure annual salaries really are so
disproportionate.
Provided that salaries are in keeping with the work performed by
each executive and are commensurate with the value they bring to
their charity, there is every reason why they can be justified.
Every case will be different and, arguably, the sector does need to
keep a sense of perspective to ensure that remuneration is indeed
proportionate. However, a modestly high salary, proportionate to
the size and importance of each charity, is one way of rewarding
those at the top for the vital work they perform.
If, as a result of media and public pressure, charities were
inclined to renegotiate reductions in chief executive pay, they
would have to do so firmly within the legal framework applicable to
employment contracts. Trustees should proceed with great care, and
always on the basis of legal advice, in order to avoid contract
disputes and potential claims for constructive dismissal.
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