Executive compensation, particularly that of chief executive officers (CEOs), has increased rapidly in recent decades and has become a frequent subject of discussion nationally and regionally. While CEOs at for-profit
companies have commanded the highest compensation packages, CEO compensation at public charities has also increased. In fact, high executive compensation at public charities frequently leads to greater levels of concern, because of the view that large compensation packages take money away from charitable missions. They can also negatively affect the perception of the charities with employees, donors and other constituencies, as well as with the general public. At the same time, the largest public charities are complex organizations in their own right, and demand a level of executive ability that is at least commensurate with that complexity.

The Non-Profit Organizations/Public Charities Division (the Division) of the Office of the Attorney General (AGO) undertook this focused review of CEO compensation as part of the AGO’s efforts to increase transparency of executive compensation at public charities in the Commonwealth. This study explores a new approach to reporting executive compensation at public charities, describes components of executive compensation, and explains the process used by the organizations in the study to set and to evaluate CEO compensation.

We asked 25 of the largest public charities in Massachusetts to complete a prototype of a new reporting form for CEO compensation data for a three year period (2009-2011). We intend to incorporate a version of this
new form, the “Schedule EC,” into the Form PC annual report for certain Massachusetts public charities. We also requested the opportunity to review certain additional information about the 25 organizations’ approach to executive compensation.

This study and the Division’s new Schedule EC are intended to increase transparency by explaining the types of compensation and benefit vehicles large public charities use to compensate senior executives and by requiring additional detail not generally reflected in the IRS filings (e.g., Schedule J), and by doing so on a more current basis.