Executive pay: what’s the magic formula?

How much should a charity chief executive be paid? It’s not a straightforward question, depending, inevitably, on the nature of the charity. Big? Small? Local? Global? Managing a handful of volunteers or thousands of staff, tens of thousands of volunteers, and billions in investments?

The job of setting senior pay falls to trustees, the volunteers who oversee a charity. Particularly at larger charities, trustees will be feeling the pressure all the more following recent media attention on salary levels. This is why we have set up an Inquiry into executive pay that will provide some solid and practical guidance on setting senior salaries.

It’s striking that in debates on charity pay, standard allegiances are frequently inverted. Those who would usually argue that an unfettered market should determine salaries suddenly call for restraint and regulation when it comes to our sector, while those who would otherwise decry high salaries say the market cannot be ignored.

There’s widespread agreement that setting the right level of senior pay is a tricky task for trustees. The decisions involved are not just technical but also involve organisations’ values and ethos.

Of course, in the voluntary sector in particular, I think, pay is part of the equation, but not all of it. So is enjoyable and rewarding work, a friendly and supportive workplace, a sensible commute, and a million other little things that all add up. Nevertheless, for better or worse, someone who realises their peers are all earning far more than they are is unlikely to be content.

The voluntary sector doesn’t have a monopoly on enjoyable or fulfilling careers in which you can make a difference in the world. Many people do this in the private or public sectors. The salaries of head teachers, council chiefs or senior doctors and others frequently run to six figures or thereabouts. For organisations, scrimping on pay can lead to costs rising and opportunities and experience lost, or never gained, because of high staff turnover.

Yet there’s a bottom line to look at, and salaries have to remain reasonable, affordable and fair. Many donors were clearly taken aback when they heard about top salaries. To make life harder, while there is an inexorable – and correct – move towards transparency in charities as there is elsewhere, there’s also reason to think that transparency about pay has actually driven remuneration up. Nevertheless, I don’t think that refusing to disclose salaries is a credible response, even where it doesn’t fall foul of the Charity Commission’s rules.

So. It’s complicated.

And the magic formula for chief executive pay is…

Each organisation will need to weigh up these factors for themselves. I don’t expect our inquiry to come up with a magic formula, but I hope it will provide a practical framework to help organisations, and trustees in particular.

Along the way I hope we can have some sensible, meaningful and genuinely helpful debates about how we recognise people – both in narrow financial terms but also by being good employers – and how we balance competing demands and expectations for how we use our resources, and also how we explain our decisions.

The group we have convened to create a home for these debates and to produce this guidance is a strong and diverse group with expertise in all the crucial areas. The full membership of the Inquiry is included in our press release, but we have experts in remuneration, HR, accounting and law, among voices from sector organisations of different sizes.

I expect the Inquiry will examine research and data on pay in our sector and others. I’d anticipate them also thinking about how executive pay relates to pay at other levels. Some have called for organisations to aim for specific ratios between their highest and lowest paid staff, for example. (For the record, NCVO is a London living wage employer and our ratio is about 8:1). The exact process will be decided when the group first meets in a couple of weeks. But I expect they will take evidence from a broad range of people with an interest in the issues.

Representatives from a couple of major charities whose pay levels have come under scrutiny have been included among the Inquiry members. The Inquiry will want to know how they arrived at the figures they did. We need a genuine understanding of how they come to these figures and how it feels to go through the process of doing so – what their influences, values and anxieties are. It’s important to look at benchmarking data, for example, but you also have to understand what’s really happening when these decisions are made. (What sociologists might call verstehen, as I used to tell students.)

Some charities that came under the spotlight over their pay have also agreed to put us in touch with donors who complained to them, so the Inquiry will also hear the perspectives of donors who are concerned about pay.

We are aiming for the Inquiry’s work to be complete in spring 2014. If you have any views, suggestions or evidence you would like to submit to the Inquiry to inform its work, please email execpay@ncvo.org.uk.

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Karl Wilding Karl Wilding, Director of Public Policy and Volunteering, leads NCVO's volunteering, policy, research and campaigning work in the UK and internationally. With lead responsibility for shaping the external environment for the voluntary sector, he blogs about the big issues facing voluntary organisations.

35 Responses to Executive pay: what’s the magic formula?

  1. Howard Sinclair says:

    ‘Executive pay – what’s the magic formula’ is the wrong question.

    The starting point should not be to look specifically at pay for CEs (I would say that, of course) but rather to look at having a coherent, fair and transparent ‘reward and recognition’ policy that applies to all staff and treats everyone within the same framework. It then becomes easy to set CE pay as we are after all just another member of staff albeit with some specific responsibilities. CEs and senior managers are not in and of themselves special and should not be treated in a special way.

    By looking at CEs pay per se the ‘Inquiry’ (which is rather a grand and legalistic title) will come up by definition with the wrong answer.

  2. Michael Fulton says:

    From my perspective, you are in the wrong type of country/society with this enquiry. Who are these people who think that they deserve so much money? What is their actual need for it?

    Regrettably, we live in a very consumerist and acquisitive society with great stress on the pursuit of money rather than contentment.

    From my point of view, if this country had a high level of taxation (perhaps 95%) on income over, say, GBP75 000, it would not matter to society what anyone earned flowing from what may be considered as excessive rates of pay, as they would be drastically cut down by such a tax.

    To answer your question directly, as little as possible, and seek people who are internally self-motivated to do a good job, and make this one cornerstone of publicity.

  3. Mark Freeman says:

    Not sure I see much representation on the inquiry from the smaller end of the charity world. And also I expect that lumping us all into one group just because we are charities has its issues. The six figure salaries and the uproar they cause do not exist for the vast majority of organisations (I would be happy to put up with a bit of uproar if my trustees want to think about putting up my salary). That said I think it is important that the inquiry does not just focus on the headlines and the ‘too much’ end of the sector but also on the ‘too little’ end of pay levels. For the record we are also a living wage employer and the salary ratio is a little under 2:1

    • Roddy Smythe says:

      I don’t agree, there are smaller charities e.g Debra with an income of around 10m giving just a couple of million to their charitable aims yet paying their CEO between £160 and £170000. So smaller charities are the same. Yet r same organisation will make lower paid staff redundant!

  4. I think it is necessary to see ourselves from the standpoint of individual donors, or potential donors, to a charitable cause. I do think it is important always to remember that supporters/donors are primarily interested in two things: 1)That their particular donation is appreciated and handled with care and applied to the stated purpose and 2)That the donation will make a difference that is appreciable. Of course, most donors/benefactors will be aware that the larger the charity the more important it is to be run by professionals — usually well paid. However, when the trustees of a charity decide to offer top executive pay in order to get ‘the very best’ they potentially risk alienating their own support from donors/volunteers. Personally, I would only donate to a charity that was either run on a voluntary basis or otherwise hired dedicated and bright people that were paid favourably, but certainly not excessively.

  5. Phil McMullen says:

    Given the subject under discussion, when clicking on the link to “Full membership” I expected to find details of each person’s salary. That really was very, very naiive of me, in retrospect…

  6. Catherine Bavage says:

    I am a Chief Exec. I think this inquiry completely misses the point, which is the very low pay that most voluntary sector workers typically earn. This problem is particularly exacerbated in London, where costs of living, especially accommodation, are astronomical. For those that don’t already know, the London Living Wage is just £8.55 an hour. This equates to £15,561 pre-tax per annum for a 35 hour week. A huge number of charity workers are well-educated, skilled, caring professionals that work hard to serve the communities they live in or their charity’s cause. Most of the charity workers I know earn under £35k, even experienced managers.

    NCVO sounds pleased with itself that its own ratio of senior executive to lowest paid staff member is 8:1. What this means is that NCVO’s Chief Exec is earning at the very least £124,488 to manage a moderately sized infrastructure organisation. Is its Chief Exec really worth 8 times more than an administrator? Does he work hard? Yes, probably. Does he work 8 times harder, or does he have 8 times more impact? I very much doubt it. As for Hutton, in my opinion, he is deluded when he supports Cameron et al by suggesting that a 20:1 ratio (ie a salary of over £311,000 for a senior public servant) is reasonable. However, it’s not really surprising that a white middle class man would seek to preserve the status quo of all the white middle class men occupying the vast majority of these high-earning positions.

    Why isn’t NCVO arguing for flatter pay structures and a more even distribution of wages in the voluntary sector? Surely a ratio of 2:1 or 3:1 would be a far better thing in charities with limited funds? It would help reassure donors that their money is being spent prudently and would better reward frontline staff who often work in emotionally demanding jobs.

    And as for those charities and trustees that have chosen to pay their Chief Execs colossal salaries, let’s not rally round and support them. Instead, let’s allow them to take the flak for a while and see if they can justify their decisions when properly scrutinised. Maybe some of them will have a re-think.

    • Alistair Pugh says:

      Catherine and David, your concerns are perfectly legitimate and it is vital that you have the courage of your convictions and make your views known in your particular organisation. Alas, we have acquiesced into accepting a wholly unethical culture of grossly inflated salaries and bonuses in banking and the private sector generally – local government, QUANGOS and the charity sector, too, now have similar rationales when it comes to paying even middle-ranking bureaucrats grossly inflated salaries. Local government would be much more efficient and economic if swathes of ‘administrators’ were ‘let go’ and I suspect this holds true for many charities.

  7. David Hoghton-Carter says:

    I’m really quite surprised and dismayed that NCVO seems so damnably pleased with itself for operating at a 8:1 ratio. I strongly support Catherine Bavage’s comment on this.

    And i’ll add that running a major consultation on executive pay while maintaining quite a high disparity ratio seems very disingenuous, even hypocritical. It calls into question how independent the final output will be. Will you really be willing to suggest significant change even as you pay your senior execs in this way?

    Karl – would you yourself take a pay cut, knowing that the extra money can go into better front-line service for VCOs? I’ll take a silence on that one to be indicative.

    As someone stuggling to get a new project off the ground, I’m finding very directly that the influence of high pay is deeply pernicious. It deepens distrust of philanthropic innovation. As a sector, we really do need to do much better.

    And for the record, I would never consider more than a 3:1 ratio for what I’m building, and I’d try my damndest to keep it to 2:1 at worst (ie. keep senior pay under very tight control and try my best to keep junior pay very respectable). If I was ever handing over control to someone else, I’d want to be sure they shared that ethical outlook. They’d get one hell of a hiding on public forums if I ever found that said hypothetical future leader had betrayed the original vision I’m working on by diverting money into their own pocket at the expense of the front line.

    I’ve actually given a bit of thought to pulling out of NCVO on the basis on this blog alone.

  8. Leah Levane says:

    I agree strongly with Catherine. In relation to the ratios, I would agree that 2 or 3:1 would be fairer for staff and donors – and, incidentally, I sincerely hope that the ratios include those people who are working for the organisation through contracted out services, such as cleaning staff.

    I have only worked in relatively small charities (the largest was a local development agency, which now has an income of nearly £1 million. I am now a lone worker and pleased to be earning £30k(in London). I was the CE there and I earned about 2.5 times what the cleaner would have earned had she worked full time and I prioritised rationalising (raising) the salaries of administrative, cleaning and crèche staff. (I was managing a staff team of over 40 people). I am not saying that is right, but just to indicate my own experience.

    The idea that anyone deserves or requires a salary in excess of £100k (beyond the wildest dreams of most of any charity’s client group) causes me to question the motivation (I question it for all sectors, but at least the private sector is clear that its purpose is to make money and so this is reflected in rewards to staff.) The average income in my part of London is £24,500, so my pay is above that. If I struggle a bit, this may help me connect with the people I am working with and for in this poor part of London. Whose experience are these people on such high salaries connecting with?

    One argument is that so called charities have had to become more ‘business’ like in this era of contracts, etc. – well I would have preferred that charities went far less for this sort of thing and instead had joined campaigns to keep services in the public sector. The part of the sector that pays salaries in excess of £100k is not part of any sector I recognise, after 37 years working in or with the voluntary sector. Most charities, indeed, have no paid staff at all. I think these large organisations, paying such high salaries, really belong to another sector altogether – one that has not been named, perhaps. If the primary work of an organisation is to run services under contract for Local Authorities or Health Services, then why are they still charities? what is the difference (financially) between them and, say, Virgin Health Care?

    I would like the sector to find its voice again and pay decent but reasonable salaries.

  9. Richard Day says:

    As long as it is the Charities themselves who decided the level of salaries given to their management staff (I feel the other executives should not be left out of this discussion) I have no problem with what salary is paid. However it should be comparisons with other charities and voluntary organisation, not seeking to emulate large multi-national businesses whose C.E.’s have many other expenses to deal with, which I think charties do not.

  10. There is a complicating factor here about the pay of all people in public service roles. Many of us work closely with public sector colleagues and will often be sat around tables as equal partners and yet their salaries will be far in excess of ours and sometimes for roles with less responsibility. I agree that there should be thought given to salaries paid, but this needs to be across all areas of public service, both voluntary and public sector.

  11. Rachel Quinn says:

    I would like to see more performance related pay for CEOs in the sector.
    I think pay level should reflect the skills and quality of the person you are seeking for the role. Lets be frank here – many VCS CEO roles are difficult and require a range of skills and personal disciplines that are hard to find and even harder to retain.
    However, VCOs are not bottomless pits and if we open ourselves up to expensive salary bills without robust monitoring of what we are getting for that investment then things can quickly go wrong. Much better that a Board be clear about what it wants the CEO to deliver and reward delivery when it happens. Any bright CEO then has to make a judgment over whether the deliverables are achievable or not. If they cannot make that judgment then they are probably not worthy of the role.
    This approach both protects the organisation and rewards high performance – a commercial principle but the performance targets do not have to be commercial (impact, engagement….)
    Possibly a tad direct (it is Friday night) but highly pertinent to me at the minute as this is the way my Chair and I are encouraging our Board to move.

  12. Dolyanna says:

    Just by reading the range of responses that have been generated as a result of this blog, responses that are all shaped by people’s different roles and experiences in the sector, it means that it is a debate worth having. As someone in my mid thirties, who has worked in the sector for 15 years and who may one day aspire to be a CE i am very much interested in knowing more about this…Thank you Karl for having the courage to open up this discussion and hopefully you will have the resilience to accommodate the personal nature of some of the responses you receive.

  13. Liza Dresner says:

    There is another element to this.My organisation provides front line, autism services and I have been very proud that we have no need to mention the London living wage as we have always paid our lowest paid staff over £10 an hour for the amazing work they do. Many get more than that. I have nearly 300 staff most very part time and my salary as CEO is under £40,000 a year for a 40+hour week. I am now under intense pressure to lower the wages of my hourly paid staff to the London Minimum wage! Local authorities who buy our service say that we pay our lowest paid staff too much. The minimum wage used to be something people were slightly ashamed to be paying. Minimum is not average. Now it seems to be the bench mark for wages in the care sector. That is what we should all be protesting!

    • Alistair Pugh says:

      Liza, my daughter is a primary school teacher in Manchester – with an M.A. from Edinburgh University etc. working in a very demanding environment…her salary, aged 28? About 23 thousand pounds! Her partner (a Ph.D molecular oncologist working on breast cancer therapies gets fractionally less). Actually, you are well remunerated in your role! Sadly, since “charidy” has become a ‘professionalised’ activity, salaries for the ‘managers’ at every level have systematically sought to legitimise and justify very generous salary levels and lots of other questionable private sector perks and bonuses. It is a ghastly situation, reflected in so many of the underlying attitudes to be found in the posts above. And, of course, the greed – for that is what it is – betrays all those givers and fund-raisers who are blissfully unaware that so little of their money actually gets to the front line.

  14. Karl Wilding Karl Wilding says:

    Rather than trying to respond to comments individually I’m going to try and address the comments we receive on an issue-by-issue basis.

    The make-up of the Inquiry panel: we have attempted to blend expertise and experience. Yes, there are a number of large charities involved, more so than smaller organisations. Smaller organisations are represented – they are not absent. In running this inquiry we want to hear from organisations of all sizes – NCVO has thousands of small organisations in membership, which is why we have written to them all about the process. Anyone can submit evidence or a view.

    This is not an inquiry to justify the salaries paid to senior staff – it is not ‘rallying round’ anybody. Equally, it is not calling for reductions in anybody’s pay. The aim is to help trustees put in place a system for deciding appropriate pay. That’s why you wont find a link to the salaries of the inquiry panel members: they are unpaid volunteers, mostly chairs of trustees. The Inquiry is led by NCVO’s Chair, not its senior management team. So, there is no self-interest or pre-determined outcome. (The secretary to the Inquiry is paid, as a consultant, on a day rate.)

    On the issue of focussing just on the ‘high end’: yes, there is a need to focus on those at the other end of the pay scale, which is why the Inquiry will be asked to look at ratios. There are some stern comments here about my mention of NCVO’s ratio: this was mentioned as a matter of fact, with no comment appended. It’s for the inquiry to judge whether this is appropriate or not.

    On the issue of whether there is a magic formula or not – well I would be surprised if there is. It’s not the aim of the Inquiry to look at CEO pay in isolation – and I would be surprised if that is the direction it takes. A number of people have already noted to me that the CEO is not always the most highly paid member of staff, by the way. I’ve already had a look at one organisation that we were referred to – and the CEO is paid half of the amount given to two employees.

    Should we take into account the voice of donors? Yes, absolutely, just as charities do and should. But it strikes me that the Inquiry members need to get the balance right here: donors are one of a number of stakeholder groups. By the way, it’s possible that some donors might view higher pay a good thing. We’re aware though that this is not the view of the donor on the Clapham omnibus – assuming of course that is the view of donors, rather than those justifying the decision to not give.

    Who should charities compare with when setting salaries? This is worthy of a blog post in itself: I’ve looked at many salary surveys over the years, and comparison is difficult. I wonder if the act of making a comparison – favourable or otherwise – immediately invokes accusations of seeking support. Either way, I think the Inquiry is going to need some better evidence than the partial snippets that have supported much of the debate so far.

  15. As a senior and highly experienced reward professional my view is that the issue of pay and total remuneration in any organisation is a complex issue with many stakeholder views to take in to account. The starting place is always to define your labour market. What type of person, with what type of skills and experience are you trying to attract and what are the markets in which this person may be found. Second, what is the remuneration strategy of your organisation?
    The third part of the process is to have hard market data; from your chosen market, to decide on the appropriate market price. Then you use your remuneration strategy to decide where you wish to sit against the market price.
    Forth, you talk with your various stakeholders (as much as you can) to explain and obtain agreement (or at least a lack of opposition) to your proposal
    Finally, you test your market to ensure that you can obtain the level of individual required for the price you have decided to pay. At its simplest, it is about supply and demand. If there is more demand than supply then the price will rise.
    My perception is that the issue with senior remuneration in the third sector is that there is some form of expectation that people who work in the sector have more of an altruistic approach to life and thus may be considered willing to work for the common good rather than hard cash. I would be prepared to work for a charity for less than I would for a commercial organisation. However, it is, if you like, the negative premium that again needs to be measured, to decide the difference from the wage on offer and the market price – back to the reward strategy again.
    These are not easy or straight forward issues. However a robust remuneration strategy with appropriate hard market data and analysis will give a position of strength from which to discuss wage levels with the organisations stakeholders and beyond.

  16. If the voluntary sector is trying to change society should it not take Gandhi’s famous advice and ‘be the change [it] wants to see in the world’?

    Deciding that the only way forward for the sector is to have ape other sectors, which by definition, have other motives, must surely by folly.

    The idea that top staff need to earn vast multiples of their colleagues earn just follows the private sector idea that financial incentive is the only way to get anyone to do anything.

    My experience of the sector is that no member of senior member of staff (maybe except you Karl) works more than 8 times harder than anyone else.

    They already enjoy greatly enhanced status, knighthoods, access etc. Why do we believe they also need to be massively financially compensated too?

    The banks are always arguing that they need to pay astronomical sums to keep hold of their genius top staff. The same guys who lead the world to the brink of financial destruction by the way. It’s just a con to keep the money where it’s always been. Why should the sector make the same arguments?

    The press and public are wrong in their condemnation of senior staff earning large salaries. They underestimate the value of the work done by the sector and so think it’s just a ‘nice to have’ which should be carried out by well meaning souls for little reward.

    But this debate should give the sector an opportunity to think about how it structures itself and why there is such salary disparity.

    It’s often the case that staff wages are frozen while chief exec pay is decided by the board. A board which is often very close to the chief exec.

    We’d rightly criticise other sectors which behaved like this.

    Shouldn’t we take this opportunity to be the change?

  17. Caroline Cook says:

    Many complex issues. Re the make-up of the inquiry panel – I was interested to note that out of the 19 names, only 5 are women, and surprised that I had not seen this commented on by others.

    To support some of the comments about a fair and just society and how this debate is part of a much bigger picture about how we would like our society to be – the book ‘The Spirit Level’ gives data from across the world that shows that the the level of equality in a country is a good indicator of the level of social well-being or national happiness. That is, that in more equal societies more people have better, healthier and happier lives.

    This is obviously too big a remit for the inquiry panel but I do believe that as individuals and organisations we need to soul search about our values and how we live these out. I certainly understand the need for ‘good’ salaries in the sector, but personally I would rarely choose to donate to a large national charity, preferring smaller more local ones, partly due to the assumed lower salary issue. I agree with an earlier comment that questioned the need of anyone for ‘a salary in excess of £100k’.

  18. Lee Vallins says:

    I think that pay in the voluntary sector should be reflective of the level of responsibility, the expectations of the role and the impact that particular role has on others and on the employee.
    A CEO of a national charity that manages large complex contracts, commissions, responding to the ever changing emergencies and demands that occour, should be paid a respectable salary that is commiserate with the weight on their shoulders, especially when their organisation is under the spotlight, or expectations are great.
    Equally, a CEO of a small charity should have a similar rule applied, albiet at a lower level.
    I work for a small county based charity and have to say that the pay is reflective of the roles and responsibilities and I am satisfied with my lot. However, it does become tiresome when sat in meetings with statutory sector colleagues that complain about workload vs. salary when they have less responsibility, or a narrow remit, and bieng paid more than me.
    I would love to be able to do my job for less, or voluntarily, but I have a mortgage and bills to pay, a vehicle to maintain to support with my work. Nothing is truely for free these days except for the privelidged few that are able to work part time or voluntarily; sadly I don’t fall within that catagory.
    If everyone working in a paid capacity in the many vital voluntary services out there stoppoed, the country would struggle.
    Boards should continually review and monitor the pay of their staff to maintain a respectable balance between renumeration and work expectations. There will never be a definitive answer to this debate as so many variables must be considered.

  19. David Hoghton-Carter says:

    Apologies for chiming back in briefly, but I’d also like to offer a quick riposte to Karl’s reply.

    Karl, you really don’t seem to have fully acknowledged the depth of committment to cause around this issue, certainly on this thread, I suspect perhaps even in the background. We’re a well-informed audience here, and we all know spin when we see it, however well-intentioned.

    NCVO exists to champion the interests of the sector and it’s members, our interests. You really don’t seem to be doing that. The impression that’s coming out of this (and I’m very surpised and angry to find myself thinking along these lines) is that the inquiry will be little more than a thought exercise, and will not be used to leverage change.

    I know there’s an imbalance in position, power and influence between those in senior roles in the largest charities NCVO represents, and those in the smallest. But your commentary really seems to suggest that NCVO will allow the views of a small sub-section of professionals in voluntary sector to trump the drive to create positive change that a clear, well-informed majority holds so deeply.

    I strongly agree with Lee Vallins that it’s crucially important to see charity sector workers paid appropriately. But we need to acknowledge, as commentary above has reiterated time and again, that our sector is categorically different to the profit-led sector, and that different standards should apply. Standards which have our ethics at their core. This thread has highlightly very strongly that many of us hold to the (inherently reasonable and justifiable) belief that means significant pay moderation at senior levels, junior pay that provides a decent standard of living, and a focus on maintaining the strength of front-line services. That this whole debate focuses on pay equality when we’re living in a society of increasing inequality, and unequal pay, speaks volumes.

    I hope you’ll prove me wrong on all this in time, but I’m really deeply questioning the utility of NCVO membership if you don’t seem able to state a position that’s in line with a view that’s clearly very deeply held by many front-line members.

    Instead of using this inquiry as a thought experiment, from behind the veil of ignorance, I’d much prefer to see NCVO state a strong position based on specified normative values, then test the validity of that position honestly, thoroughly and openly, based on the context of those values.

    • Karl Wilding Karl Wilding says:

      Hi David
      I can’t answer some of your questions because I’m not going to pre-empt the outcomes of the inquiry. So, I’m not making statements or value judgements about the rights or wrongs of anybody’s pay or making comments about the changes the sector needs to make.

      But I don’t want to ignore you, so…

      You’re suggesting that I need to acknowledge that our sector is different to the for-profit sector. I think most would agree that it is; but underlying this issue are some long-term changes that I’ve written about before: Is the charity sector really failing us? and The future of work in the voluntary sector.

      I think you make an interesting point about normative statements, which I will put to the inquiry panel. The challenge of course is that in a diverse sector not everyone will agree with those values statements. You might want to note that the chair of Community Links is a panel member – and that they produced this publication on how organisations can live their values.

      NCVO will, I hope, emerge from the Inquiry with strong guidance for trustees (who ultimately are those charged with taking action) based on reasoned argument, the best evidence base we can bring to bear, and, to the extent that it is possible, shared values.

      • David Hoghton-Carter says:

        Thanks for your reply, Karl, and for the further reading.

        I won’t say you’ve assuaged my doubts on this, but I’m willing to reserve further judgement until we’ve all seen the outcomes of the inquiry; published recommendations, further coverage and dissemination, and how NCVO adjusts it’s own values and internal culture in light of it.

  20. Mike Wild says:

    I find it hard to disagree with the comments made about the sector needing not to fall into the bad ways of other sectors. We should be looking at this in the context of showing leadership: the charity sector behaving the way we would want others to behave. For me that means looking at how sector salaries compare with average salaries across society as a whole, not just in the usual “market” comparison to parts of the business or public sector. I’m uneasy – though I’d put it no stronger than that – about charities (and public sector for that matter) having employees who are higher rate taxpayers. It feels inconsistent. Idealism it may be, but if we’re not at least informed by ideals in our sector, what’s the point of us?

    I’ve commented elsewhere on my concerns about this focus on the large charities distorting not just the debate but the way the public perceives our sector.

    • AUDREY THORNTON says:

      I agree with Mike Wild, I am the manager of a small local Charity. As I am over retiring age, I work voluntary. Our staff are paid over the minimum wage but earn every penny of it. I am not going to be around forever, and so to replace me we will have to pay for a new manager. We will offer a good living wage for the area we live in, but it will be in line with salaries being paid locally and in no way reflect the salaries being received by the Big Charity CEOs , which would keep us afloat for two years. Also a note to Lee Vallins, I have done voluntary work for 37 years in the community and with children, I was a working single mum who brought up four children on my own, not a person who can claim to belong to the “privilaged” few. I held down a job raised my children and still found time to volunteer.

  21. John Adams says:

    This inquiry…..

    A timely attempt to help the sector deal practically with a tough issue?

    Or a pre-emptive, defensive move against the coming wrath of the regulator, increasing media scrutiny of charities and the Gagging Bill?

    I wonder.

  22. Marie Turnbull says:

    I am a Head of Fundraising at a regional charity who earns a fair salary and has no wish to become a Chief Executive. On the whole I have a view that there should be more equality in the world, for example between private sector Executives and lower paid workers. However, I look at the Chairty sector and as well as celebrating all the good that is achieved and progress made, we must make greater progress rather than continuing to chip away, and if our sector could pay higher salaries to attract the best of the best from the private sector, I’m sure this would be paid back in better outcomes. For this and many other reasons I am fully supportive of increasing/ maintaining highly paid CE salaries when appropriate. Do we not think the CEO of Save the Children/CRUK etc command as high a salary as many chief execs in the private sector? My views may seem at conflict but I’d hope that on the occasions where a six figure salary was necessary, there is good reason for that.

    I do think however that British society is not ready for this and therefore charities run the risk of losing income. We therefore need to complete the important work that Karl speaks of and more besides. We then need to start changing the way society views the ‘overhead ratio measurement’ and set about changing the world rather than continuing to make incremental change. From the comments above and the views of others, I think this will take longer than I’d hope. I do hope we don’t have to wait for our American colleagues to lead the way on this and follow them later….

  23. Marie Turnbull says:

    Sure many of you have seen this but if not it may be of interest…

    http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html

    • Karl Wilding Karl Wilding says:

      Hi Marie 😉

      I’ve been following the Pallotta debate for some time (his book, Uncharitable, is worth a read). It’s caused a heck of a stir in the US. You might be interested in this riposte from the very thoughtful Phil Buchanan:

  24. James Clarke says:

    I’m too busy managing a small charity to read through all the comments above! However, I think that Michael Fulton (first comment) and for that matter the NCVO Inquiry might benefit from reading what Lee Vallins says in his comment above as it certainly reflects my situation and, I think, that of many managers of small charities. In that sense I agree with Mark Freeman (second comment from top) and there is a need to inform the public that the vast majority of charities are small or very small and their managers generally earn far less than managers in either the public or private sector and have far worse terms and conditions, e.g. pensions. I wonder how many members of the public realise how highly paid the average school headteacher is nowadays? Yes of course we are in this for the social purpose, but we still have mortgages to pay and families to feed.

  25. Marie Turnbull says:

    Great article Karl thanks

  26. Tony Emerson says:

    I’m also a (now retired) member of the CIPD (personnel)and I’d like to take issue with Ian Davidson’s comments, especially ‘At its simplest, it is about supply and demand.’

    Ian I’d like you to provide the evidence that the basic market forces principles apply to the top manager salaries generally, and then to the voluntary sector in particular. In other words if organisation A pays more to their top people than organisation B then people will inevitably go to the former rather than the latter. I think you will find that the CIPD evidence on this question in ambiguous at best.

    It may be the case with 25 year old professional footballers – but for 50 year old charity bosses perhaps settled in their communities, perhaps with kids at local schools, perhaps committed to their work (hopefully not just ‘perhaps’) and to the team of people they work with?

    The mid-nineties study I recall cast doubt on the nature of the CEO ‘market’ in any sector – and suggested that collusive remuneration committee’s may have been the problem.

    My conclusion from this is that the vol sector has everything to gain by taking the risk of limiting top pay. Who really needs more than £100k a year?
    Many people don’t know what to do with such a salary – a comment I heard from a primary school head. Any problems caused by the few people the sector might lose, would be more than balanced by all the gains arising from giving a lead to society in challenging systemic inequality, and of course the gains in donor goodwill and in the morale of the mass of sector workers.