It's critical to compensate non-profit employees near the market rate otherwise you end up with sub-par performers, martyrs, having the vision co-opted by the wealthy who can afford to be underpaid, or the young who leave disillusioned.
The Gates foundation pioneered this approach and imho it's the right way to operate in the sector.
Asking tangentially, earnestly, and with a genuine lack of knowledge: are $404k and $311k the market rate for the base compensation of a CEO and COO of a non-profit at Wikimedia's scale?
In my experience reading hundreds of IRS 990 forms these number are not out of bounds for non-profits at their scale. Healthcare and university may skew the absolute numbers, but are similar.
Specifically a great executive will personally move the fundraising needle in organizations (+1-5% or more) and mediocre executive can cause losses/missed opportunities in the opposite direction of a similar magnitude. The conventional thinking is the relative fundraising impact of a great vs a good executive may 10x their total compensation, so it's probably worth trying to retain the best.
Anecdotally, I know of a not-for-profit COO who offended an NBA player killing the relationship. His successor COO repaired the relationship, ultimately resulting in multiple millions of new donations and a co-marketing agreement with the team. When the COO was hired there were rumblings because he'd negotiated +$50k over his predecessor.
With no equity and the poor optics of commission compensation or cash-bonuses, big severance packages are one of the few ways an organization can reward employees following years of great service.
The problem isn't that Wikimedia is paying employees too much, so much as it is that they have too many of them. Their COO compensation is not out of line for the scale of Wikimedia - But Wikimedia is way too big of an org without relation to serving their core goal.
Explorative projects like their New Editor Experience[1] were interesting, but ultimately unsuccessful moonshots. That one wrapped up (without anything to show for it, as far as I can tell). They didn't take the hint and downsize, they doubled down.
This is an incredibly common problem for organizations - "The bureaucracy is expanding to meet the needs of the expanding bureaucracy" as was put by Oscar Wilde.
The banner probably drives enough small donors to give the big donors confidence that they are force multipliers and not just propping up a one-off thing.
1. for regular employees.
2. Assuming market rate is fair and not minimum wage
There is no reason executive pay needs to follow market rate dynamics at a non profit. Otherwise you’ll have underpaid and free labor while executives milk the cow at 100x median pay rates and generous golden parachutes.
Maybe at the $10MM scale I'd agree but even CEOs of Fortune 500 companies rarely make that much unless they are founders or hit all their targets over many years in a row.
>> It's critical to compensate non-profit employees near the market rate otherwise you end up with sub-par performers
I hear this all the time for not-for-profits and government roles, it sounds good but just doesn't hold up. The leaders in these roles are not measured or held to the same metrics as private companies, they're not competing for the same jobs and they're not the same pool of candidates. The results prove this out: the metrics and tenure of "high paid" bureaucrats are no better than lower paid leaders at the orgs. The "we have to pay the same high comp to get the same high quality leaders" fallacy is misleading.
I think it holds true for competitive public positions in places where they are trying to get rid of corruption. It raises the cost of bribing people in power, and makes it much more attractive to get into politics for the right reasons.
The best example is probably Singapore, which is surrounded by corrupt neighbors, and deeply involved in industries that thrive on corruption (shipping), but is notoriously a place where officials follow the rules.
Virtually all of the underpaid executive bureaucrats in the US are already rich or will be once they cycle out. They are underpaid for a few years and then are made whole. It would be better to just pay them properly in the first place.
The Gates foundation pioneered this approach and imho it's the right way to operate in the sector.