The Chronicle of Higher Education reports a marked decline in the growth of salaries for the heads of public colleges and universities.  The article is here.

Meanwhile, at the Harvard Business Review, Dan Pallotta observes that adverse public reaction to compensation perceived as high may be tied to the nature of the nonprofit, and that executives for nonprofits perceived as doing charitable work may be more vulnerable to criticisim than more highly-paid executives in the arts or high-end college sports coaching.  The post is here.

Although the deadline for complying with Section 409A of the Internal Revenue Code was December 31, 2008, the IRS has provided some avenues for correcting errors in deferred compensation plan documentation.  The most recent is IRS Notice 2010-6, found at www.irs.gov/pub/irs-drop/n-10-06.pdf.

Following up on the 400 questionnaires sent out to colleges and universities under its College and Universities Compliance Project, the IRS has announced that it will conduct audits of 40 of those schools, with a particular emphasis on executive compensation.  As noted in our earlier posts on this subject, this activity by the IRS follows on the heels of a similar project examining nonprofit hospitals.

Lawrence Associates will present a two-part program “Will Your Nonprofit’s Executive Compensation Withstand Scrutiny by the IRS, Public and Media?” including an overview, strategies and responses.  We will be joined by Richard Lucash of the law firm McCarter & English.  The webinars will be run on January 27 and February 24, 2010 at 1pm EST.  Registration is free using the comp code at our web site.

Wednesday Webinars is a series of free one-hour educational offerings by experts in nonprofit management.   Most presentations have been offered at nonprofit conferences, and all are aimed at providing professional development opportunities for senior staff and trustees of nonprofit organizations

The blog FierceHealthcare (www.fiercehealthcare.com) reports that “More than 100 executives at Kettering Health Network, named by Thomson Reuters as one of the top 10 U.S. health systems, had their pay frozen.”

An article in the Charlotte Observer has been spreading virally across websites and blogs since it was posted on December 20.  While it repeats the mistake of articles from other sources by noting the Charity Navigator survey that reported an overall increase in nonprofit CEO salaries, while neglecting the fact that the survey covered 990’s from before the economic downturn, it’s nevertheless a likely indication of the direction of the political winds – or headwinds, so to speak - regarding nonprofit salaries.  It appears that the unfavorable publicity about for-profit salaries is spilling over to the nonprofit side.  The article describes a number of what appear to be egregious cases, but then seems to slide over to the common position that a high salary for a nonprofit CEO is automatically suspect.  Another item in the article that we’ve seen picked up by many other websites is a discussion of the small number of IRS personnel assigned to monitor nonprofits.  Watch for action from Congress on this next year.

Forbes Magazine – usually, in our estimation, a pretty good business journal – recently published an article that’s one of the more extreme examples of the mindset that “people who work for nonprofits should be paid less that those who work for for-profits” or perhaps “it’s inherently wrong for a nonprofit CEO to make a significant income.”   The article lists some nonprofit CEOs and their incomes, as if the dollar amounts were sufficient to establish the incomes as “unreasonable.”   We could point out all the problems with the article but the comments on the on-line posting do that pretty thoroughly.  The real question is not whether this article and others like it are well written or not, but rather whether the attention that CEO salaries have attracted since the recession began last year will ultimately manifest itself in new regulations on nonprofit compensation.  For that, it’s more important to pay attention to pronouncments from Congress and from key people at the IRS, as reported in many of our earlier posts.  We will, as always, monitor those closely and report regularly to our readers.

As promised by the IRS’ Sarah Hall Ingram, Commissioner, Tax Exempt and Governance Agencies, at her talk at Georgetown University this summer, the IRS has issued a Governance Check Sheet for nonprofit organizations for use by its agents.  The check sheet essentially runs through the issues of nonprofit organization governance covered by the new IRS Form 990.  In her talk, Ingram said that the purpose of the data collection was to seek information to support the IRS’ view that good governance fostered compliance with the applicable tax laws and regulations.  Nonprofit organizations should take advantage of this check sheet as a useful tool to audit and monitor their governance practices.

Note items 13 and 14 which focus on compensation – essentially asking if the organization is taking the steps necessary to establish the “rebuttable presumption of reasonableness” under the IRS regulations on Intermediate Sanctions.

National Public Radio’s All Things Considered (November 23, 2009) highlighted the impact of business wage cuts, and the importance of having a vision for the future. The story featured Lawrence Associates’ client Michael Casper, founder and CEO of UltraSource, a ceramic microchip manufacturer in Hollis, N.H. Recognizing that every crisis contains an opportunity, Michael asked Lawrence Associates to help design and communicate a plan that would increase compensation based on profitability. By markedly reducing breakage during the company’s sensitive production process, these engaged employees are earning back even more than the 10% pay cut, and they are committed to the company’s success. Read or listen to the story here.