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I spoke with a CEO of a rather large non-profit hospital system who said, basically, that the only difference between a for-profit company and a non-profit comp

by exelius 10y ago

I spoke with a CEO of a rather large non-profit hospital system who said, basically, that the only difference between a for-profit company and a non-profit company is that the board of directors of a non-profit have much less oversight to ensure they decisions abide by the charter of the organization. The way the companies operate is exactly the same: try to make as much money as possible to donate it back into the charitable trust. But a lot of it goes to perks and bonuses for executives, along with increased marketing expenses to continue the "donation" growth.

rayiner 10y ago
Why should a non-profit pay its employees less than a for-profit company? The labor market is the labor market; the feel-good of working for a non-profit might be a "perk" that justifies a slightly lower salary (like equity in a startup), but it'll only get you so far. Insisting that non-profits pay people less just means they'll get less qualified/motivated people. (And to the extent that the argument is that you don't need to pay $400k to get a qualified/motivated CEO, then that's true of any company--being non-profit has nothing to do with it.)
- lgleason 10y ago
  Because they are being funded by tax payers.
  - tomjen3 10y ago
    If they pay more than they can get away with, they are wasting money, but if they pay less and get lesser-skilled workers, they are also wasting their money. Underpaying in a non-for profit assumes that they can still get the same quality worker.
  - throwaway729 10y ago
    > Because they are being funded by tax payers Again, this isn't a reasonable argument. The cost of labor does not magically disappear just because the employer is a non-profit instead of a for-profit. Teachers, clerks, and accountants don't magically cost less when they are paid with tax payer dollars. (Incidentally, administrators -- on average -- do cost substantially less in the non-profit sector.)
    - Retric 10y ago
      >Teachers, clerks, and accountants don't magically cost less Actually, charity's pay people less than market rates in other positions.
      - throwaway729 10y ago
        (edited) It's not magical, though. And it's not because the charity is "funded by tax payers". Sometimes the salaries are discounted because the charity can find someone who "believes in the mission" (sound familiar?). Sometimes the salaries are discounted because that's all the charity can afford. If the charity can't find someone willing to take the pay cut, then it ends up subsisting on below-average performers. See hospitals, for example. If they don't pay market rates for doctors, they probably have sub-par doctors. If your charity can't sell its mission as part of the compensation package, then it has to cough up. The point is, no one is going to take a pay cut just because, as GP put it, they're "funded by tax payers". Why the hell would anyone take a pay cut just because their job is funded by tax payers instead of by the Gates foundation?
        rayiner 10y ago
        Doctors are a great example. The federal government pay scale for doctors goes above $300k. Pretty much everyone else tops out around half that.
        Retric 10y ago
        Private doctors can make far more than $300k. So, making 300k working for the government does not mean they are making market rates.
  - jhbadger 10y ago
    Very few non-profit organizations are "funded by taxpayers". They are not government agencies but corporations not very different from for-profit ones except that they don't make a profit (although as mentioned, they can certainly pay their employees quite well). Non-profits can be funded in a variety of ways, from private donations (as with most charities), or even by selling products or services (so long as they don't make a profit, as many scientific societies do)
    - sliverstorm 10y ago
      Tax exempt status is a form of subsidy, paid by everyone who pays taxes.
      - Jtsummers 10y ago
        In exchange for that subsidy, the government isn't (directly) running programs like homeless shelters and food banks. Societal necessities so long as homelessness and poverty remain parts of our society. Cut the tax break, fine, but then we need the government to intervene and provide assistance for citizens.
        dragonwriter 10y ago
        > In exchange for that subsidy, the government isn't (directly) running programs like homeless shelters and food banks. Or, you know, churches. The idea that the tax subsidy is justified by the fact that subsidized charities are displacing costs that would otherwise need to be born by the government would probably be more supportable if: (1) tax subsidized charities didn't perform functions that the government is Constitutionally barred from performing (viewing the subsidy as an alternative means of performing government functions, would make subsidizing "charities" to do such barred tasks a way for government to evade its Constitutional limits), and (2) the tax subsidy were the same for all donors (e.g., a fixed proportion credit) since each dollar given would displace the same amount of government funds no matter who gives it, rather than escalating for wealthier donors.
      - dragonwriter 10y ago
- harryh 10y ago
  One potential reason is that non-profits do not need employees to be quite as good (or work quite as hard) because they are not (generally) in competition with one other. A business that operates at 90% of the effectiveness of its competitors is likely to fail completely. A charity that operates at 90% effectiveness will just produce a bit less good work in the world.
  - rayiner 10y ago
    That's a good point.
- exelius 10y ago
  They shouldn't pay their employees less - that's the point (though they often do because they can). In many cases, executives at non-profits make MORE than their for-profit counterparts simply because there aren't exactly shareholders, and people who sit on the boards of non-profits tend to be less experienced than corporate board members (often non-profits are seen as "training" for corporate board membership). This is especially common in health care. It's not universally true by any means, but it's common enough to be a real problem.
deleted 10y ago
[deleted]

by exelius 10y ago

rayiner 10y ago

Why should a non-profit pay its employees less than a for-profit company? The labor market is the labor market; the feel-good of working for a non-profit might be a "perk" that justifies a slightly lower salary (like equity in a startup), but it'll only get you so far. Insisting that non-profits pay people less just means they'll get less qualified/motivated people. (And to the extent that the argument is that you don't need to pay $400k to get a qualified/motivated CEO, then that's true of any company--being non-profit has nothing to do with it.)

lgleason 10y ago
Because they are being funded by tax payers.
- tomjen3 10y ago
  If they pay more than they can get away with, they are wasting money, but if they pay less and get lesser-skilled workers, they are also wasting their money. Underpaying in a non-for profit assumes that they can still get the same quality worker.
- throwaway729 10y ago
  > Because they are being funded by tax payers Again, this isn't a reasonable argument. The cost of labor does not magically disappear just because the employer is a non-profit instead of a for-profit. Teachers, clerks, and accountants don't magically cost less when they are paid with tax payer dollars. (Incidentally, administrators -- on average -- do cost substantially less in the non-profit sector.)
  - Retric 10y ago
    >Teachers, clerks, and accountants don't magically cost less Actually, charity's pay people less than market rates in other positions.
    - throwaway729 10y ago
      (edited) It's not magical, though. And it's not because the charity is "funded by tax payers". Sometimes the salaries are discounted because the charity can find someone who "believes in the mission" (sound familiar?). Sometimes the salaries are discounted because that's all the charity can afford. If the charity can't find someone willing to take the pay cut, then it ends up subsisting on below-average performers. See hospitals, for example. If they don't pay market rates for doctors, they probably have sub-par doctors. If your charity can't sell its mission as part of the compensation package, then it has to cough up. The point is, no one is going to take a pay cut just because, as GP put it, they're "funded by tax payers". Why the hell would anyone take a pay cut just because their job is funded by tax payers instead of by the Gates foundation?
      - rayiner 10y ago
        Doctors are a great example. The federal government pay scale for doctors goes above $300k. Pretty much everyone else tops out around half that.
        Retric 10y ago
        Private doctors can make far more than $300k. So, making 300k working for the government does not mean they are making market rates.
- jhbadger 10y ago
  Very few non-profit organizations are "funded by taxpayers". They are not government agencies but corporations not very different from for-profit ones except that they don't make a profit (although as mentioned, they can certainly pay their employees quite well). Non-profits can be funded in a variety of ways, from private donations (as with most charities), or even by selling products or services (so long as they don't make a profit, as many scientific societies do)
  - sliverstorm 10y ago
    Tax exempt status is a form of subsidy, paid by everyone who pays taxes.
    - Jtsummers 10y ago
      In exchange for that subsidy, the government isn't (directly) running programs like homeless shelters and food banks. Societal necessities so long as homelessness and poverty remain parts of our society. Cut the tax break, fine, but then we need the government to intervene and provide assistance for citizens.
      - dragonwriter 10y ago
        > In exchange for that subsidy, the government isn't (directly) running programs like homeless shelters and food banks. Or, you know, churches. The idea that the tax subsidy is justified by the fact that subsidized charities are displacing costs that would otherwise need to be born by the government would probably be more supportable if: (1) tax subsidized charities didn't perform functions that the government is Constitutionally barred from performing (viewing the subsidy as an alternative means of performing government functions, would make subsidizing "charities" to do such barred tasks a way for government to evade its Constitutional limits), and (2) the tax subsidy were the same for all donors (e.g., a fixed proportion credit) since each dollar given would displace the same amount of government funds no matter who gives it, rather than escalating for wealthier donors.
    - dragonwriter 10y ago
harryh 10y ago
One potential reason is that non-profits do not need employees to be quite as good (or work quite as hard) because they are not (generally) in competition with one other. A business that operates at 90% of the effectiveness of its competitors is likely to fail completely. A charity that operates at 90% effectiveness will just produce a bit less good work in the world.
- rayiner 10y ago
  That's a good point.
exelius 10y ago
They shouldn't pay their employees less - that's the point (though they often do because they can). In many cases, executives at non-profits make MORE than their for-profit counterparts simply because there aren't exactly shareholders, and people who sit on the boards of non-profits tend to be less experienced than corporate board members (often non-profits are seen as "training" for corporate board membership). This is especially common in health care. It's not universally true by any means, but it's common enough to be a real problem.

deleted 10y ago

[deleted]