What's a fair salary to run a nonprofit? CEOs explain their pay

When the St. Paul and Minneapolis YMCAs merged in 2012 to form the fourth-largest Y in the world, board members hired an outside business talent to lead the new nonprofit. And they didn't blink at the salary it would take to attract the right person.

Glen Gunderson was paid $531,000 in 2015 as president and CEO of the YMCA of the Greater Twin Cities, making him one of the highest-paid heads of a social service nonprofit in the state.

"I am a big believer in getting really top talent for an organization to meet its goals," said attorney Bruce Mooty, a YMCA board member. "I think we are very fortunate to have [Gunderson]. I don't believe he's overpaid."

At the other end is Mary Jo Copeland, who does not take a salary at all from Sharing and Caring Hands, the downtown Minneapolis safety net she started 32 years ago. Known for washing the feet of the hungry and homeless, she said that she has "always been here to serve God. I have never wanted to do it by taking money."

Gunderson may get paid more than most, but he's not alone in drawing a good check. Pay for the leaders of Minnesota's biggest social service nonprofits went up 3 percent in 2015, to a median salary of $150,000 not including benefits, according to the Minnesota Council of Nonprofits.

And the median salary for the heads of Minnesota's 12 largest social service nonprofits, including benefits, is even higher — about $260,000, according to the Star Tribune's 2016 Nonprofit 100.

"The reality at a nonprofit is there are expectations of accountability, health and safety," said Jon Pratt, executive director of the Minnesota Council of Nonprofits. "It's not something you do out of your basement. You are in a competition for talent."

Many board members say the compensation is worth it, that top talent translates into the ability to help more people and spend donor money more strategically. Others say that top salaries at social service organizations — nonprofits with a charitable mission — should be appropriately modest, in keeping with their do-good missions and reputations.

It's an ongoing debate in and around the nonprofit world as compensation continues to rise, although it's still well below that for comparable positions in other sectors.

"People would be amazed at the complexity of these nonprofits and the skill sets required to run them effectively," said Kathy Cooney, chief administrative officer with Bloomington-based HealthPartners.

Cooney is former board chairwoman at Catholic Charities of St. Paul and Minneapolis, one of the metro area's largest nonprofits for the poor and homeless. Its CEO is Tim Marx, a former practicing attorney and public official who made $248,793 in salary, benefits and performance incentives in 2015. The nonprofit took in $65 million in 2016 from private donors, government contracts, investment earnings and client fees.

Catholic Charities recently opened Higher Ground in St. Paul, a $40 million public-private social services partnership that offers housing ranging from an emergency homeless shelter to long-term apartments. It was a complex project directed by Marx that required years of planning, lobbying and fundraising.

"We are just blessed Tim decided to come to Catholic Charities with his skills, energy and passions," Cooney said.

Under Gunderson's leadership, the Y has grown revenue by one-third, to $150 million projected this year, and boosted the number of members and people served by more than 20 percent, to nearly 340,000.

While impressive, his package of salary, benefits and incentives is still only a third of the $1.7 million median salary, bonuses and benefits paid to the 84 CEOs who run the state's largest companies.

Both Catholic Charities and the YMCA use national and regional salary comparisons, outside consultants, internal human resources committees, job evaluations and performance incentives to set CEO salaries. Cooney said that Catholic Charities looks at salary comparisons and aims for the 50th percentile.

Terri Barreiro, a philanthropy professor at the University of Minnesota, said nonprofits want someone in charge "who is talented and skilled, but you don't ever want donors to think you are misspending their money." A negative story portraying a nonprofit CEO as a "fat cat" can have a lasting impact on donations, she said.

Nonprofit boards are usually stacked with business leaders who bring knowledge on pay and management practices to the table. As in their own businesses, they want to see nonprofits run efficiently, and they want to see measurable results.

But Marty Seifert, a lobbyist and former House minority leader, said he's not convinced that all nonprofit boards are mindful of the public's disdain of large salaries paid to those running agencies that help the state's poorest residents.

A 2007 poll conducted by the Charities Review Council of Minnesota found that 34 percent said nonprofit workers should be paid less than their for-profit counterparts, and 14 percent said they should receive no more than a stipend, said Pratt of the Minnesota Council of Nonprofits.

While in the House, Seifert offered a bill to cap executive pay at $120,000 for nonprofits that received state dollars. The bill failed, but he believes the discussion is worth having.

"In some cases the amount of state appropriations to a nonprofit was less than the CEO's salary," Seifert said. "It makes you ask: Is this really going to programming and services for the public, or is it being soaked up by the top brass?"

Copeland, whose Sharing and Caring Hands reported $8.8 million in revenue in 2016, knows she's an outlier and said she understands that her staff must be paid fairly. Her husband, Dick, is paid $90,000 a year to manage the operation.

Still, she raises an eyebrow at some of the salaries in the charity sector.

"A lot of people take a tremendous amount of money. I don't think they need to take as much as they do, but that's between them and God," she said.

Sharing and Caring Hands last year took in only 13 percent of the revenue produced at Catholic Charities, which Marx says tries to balance donors' interests with the goal of drawing and rewarding talent.

"People come with a sense of mission, but there is a limit," he said. "You want to make sure people are satisfied … and they are making incomes close to their peers in similar positions."

Both Gunderson and Marx say they've taken pay cuts to be in their current roles. Both Minnesota natives with strong ties to the community, they say that their nonprofits' respective missions keep them there.

Marx, who grew up in Rochester, joined a local law firm out of school and worked his way up to partner. With an inkling that he might want to do something else, he resisted what he called the "golden handcuffs" and lived on less than he earned so he could take lower-paying jobs. Before he joined Catholic Charities, Marx was St. Paul city attorney and its deputy mayor, and he was state housing commissioner under Gov. Tim Pawlenty. He began his nonprofit career in New York City.

Gunderson said the Y has experienced annual growth of about 6 percent since he was hired, making it one of the fastest-growing Ys in the country. "The reason I am motivated by growth is it's more people we are serving," he said.

One in 10 Twin Cities residents receive services each year from the YMCA, which has 28 locations and seven overnight camps and provides child care to more than 52,000 children each year. To maintain and expand that level of service takes top talent, said Y Board Member Deniz Cultu. He said the Y sets aggressive performance incentives for Gunderson that are more common in the corporate world.

"When you can get really talented people to lead this organization, we can have greater impact," Cultu said.

Gunderson's pay is not significantly different from that of other YMCA executives nationally. CEOs of the YMCAs in Houston and Chicago make more than he did in 2015 — $629,000 and $614,000 respectively — even though those organizations take in less revenue than the Twin Cities Y.

Gunderson, who grew up on a hobby farm in northern Anoka County, thought about getting into sports medicine out of college but found a job at the fledgling Life Time Fitness in 1995. He stayed for 15 years and was part of an executive team that grew the company from three locations to 90 and $1 billion in revenue.

He became chief business officer at RedBrick Health, where revenue during his time grew by 600 percent. When a headhunter approached him about being CEO of the newly merged Y, Gunderson said he saw it as a "swim and gym" and at first declined to apply. He changed his mind, he said, after doing some research and listening to his children.

When he was offered the Y position, he told his 9-year-old daughter that he may switch jobs. She responded: "Dad, I think you are going to help more people at the Y. You should go to the Y."

Staff writer Patrick Kennedy contributed to this report.

shannon.prather@startribune.com 612-673-4804