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Emma Espiner: NZ’s double standard on doing good

Emma Espiner argues New Zealand seems to have one rule for what’s acceptable remuneration for not-for-profits, and another for commercial enterprise

Why do we balk at paying people to do good?

In New Zealand the average salary for the CEO of a top 50 listed company is $1.68 million and the average salary for a CEO of a charity is just over $220,000. Some analysts suggest the average CEO salary in the broader not-for-profit sector is as low as $100,000. 

The level of remuneration afforded to leaders engaged in profit-generating enterprise is justified based on the value they create for shareholders or owners. But if you were to suggest that the CEO of a successful charity gets paid, say $4 million - the amount earned by the Fletcher Building CEO in 2015 - there would be an immediate outcry.

Before you laugh at me for being naïve and idealistic about giving millions of dollars to a charity boss, if this were a charity with a bold and innovative strategy to end homelessness in New Zealand, with proper monitoring and measurement of successful outcomes, don’t you think $4 million would be a fair price to pay? Imagine if you could get Rod Drury to step away from Xero for a few years to run this, or Joan Withers. Whoever. {Insert your own favourite businessperson here}.

The point is that we could potentially turn some of these intractable problems around if we could capture the interest and attention of some of our highly networked and successful entrepreneurs with a decent salary.

But we don’t. It seems we have one rule for what’s acceptable for not-for-profits, and another for commercial enterprise. In a 2017 review of the not-for-profit sector by JBWere the authors say, despite growing interest in and appreciation of the critical role of the sector in New Zealand “It is still true that the sector is only reimbursed for its successes, not rewarded.”

I want to talk about the senselessness of this double standard but first - why does it matter now?

It is an election year and the events of the last 10 days hint at the potential for a change of Government which didn't seem probable last week. There has been more positive coverage of the Labour Party in the last week than I can recall in the last decade (well, positive coverage of Jacinda, but same/same). Unlike the last three elections, it looks like there will be a genuine choice for voters both in terms of policy differences and starkly opposite leaders in Jacinda Ardern and Bill English. Both of whom have social consciences, but different ideas about how those views should manifest.

In this context, the spotlight on social issues becomes a floodlight as opposition parties jostle to find things they can fix, or at least do better than the incumbents. The social issues that I personally would like to see innovative solutions to are homelessness, child poverty and health inequity. I don’t necessarily think the Government should have answers to these problems but I do think we risk not adequately utilising our social services providers to do their best work as a consequence of our unrealistic expectations of what they can deliver with the money they’re given.

Why is it that we expect people who work for charities and not-for-profits to be better than the rest of us? To be so selfless and altruistic that they will forgo the trappings of wealth for themselves and their families for the greater good.

How then do we make sure we’re getting the most effective social services?

A key note speaker at the Institute of Directors Annual Leadership Conference in Auckland this year was Dan Pallotta. Pallotta is an activist, entrepreneur, author and instigator of some seriously cool charity events like the AIDSRide bicycle journeys and the three-day breast cancer walks. They were cool not only because they inspired the involvement of hundreds of thousands of people, but because they generated hundreds of millions of dollars for their causes. He advocates spending charity dollars on sometimes controversial overheads like advertising and marketing. He wants to do this to grow the pie. The flavour of that pie is social good. He's also the first person I've seen who has a 'praise' tab on their website, which is so American - and my reaction of mild distaste for self-promotion, so New Zealand.

Pallotta gave a TED talk in 2013 which dissects the irrationality of the situation with which we opened this piece; that we are comfortable with those who create wealth and take some for themselves, but we would not be comfortable paying those same people to create social good. He thinks this double standard is holding us back.  

"… the things we've been taught to think about giving and about charity and about the not-for-profit sector, are actually undermining the causes we love, and our profound yearning to change the world."

Why is it that we expect people who work for charities and not-for-profits to be better than the rest of us? To be so selfless and altruistic that they will forgo the trappings of wealth for themselves and their families for the greater good. It’s even worse than that, as Pallotta highlights in his talk (you really ought to watch the talk). He uses the example of the Ivy League graduate who chooses a $400,000 annual salary as a business executive over a $84,000 annual salary as a CEO of a not-for-profit. This executive can donate $100,000 a year, still be earning three times what the not-for-profit CEO is, she gets lauded as a philanthropist and ends up being appointed to the board of the not-for-profit, overseeing the poor guy who took the not-for-profit job she turned down, who has been slaving away at the coalface for a quarter of her salary.

This double standard not only limits the candidate pool for not-for-profits but it also sets these organisations up to fail, in terms of resourcing and sustainability. Think about the moralistic lens that’s applied to charities who take a higher percentage of donations for overheads. There is a perception that the charities with the lowest overheads are somehow most effective because they can give more of your donation directly to the people in need.

Even if you insist on this confused equivalence of morality and frugality, does it make any logical sense? How do people think charities and not-for-profits run? They are still organisations comprised of people, (people are overheads) and infrastructure, with compliance costs and the same ongoing requirements to innovate and do more, better, as commercially-motivated organisations. The only difference is, their core purpose is helping people who need it.

One of the things many of us like to believe about our country is that we offer everyone the same opportunities to succeed, and we help those who need it. Pallotta opened his TED talk by saying:  

“Business will move the great mass of humanity forward. But it always leaves behind that 10 percent or more that is most disadvantaged or unlucky.”

This is the ‘those who need help’ group that I’m concerned about this election. I’d like to see some more generosity from political leaders and voters towards those who need it, and a shift in attitude towards creating real social change without forcing those who are advancing this cause to make a choice between doing well for themselves and their family, or doing good for those in need.

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