What Really Shapes Nonprofit CEO Pay? Look to the Boardroom

Executive compensation in nonprofits often sparks discomfort and debate. Stakeholders want strong leadership, but they also expect fairness and accountability to maintain public trust. A growing body of evidence shows that executive pay is not just about organizational size or performance—it is also shaped by how boards are structured and who sits in the boardroom. For nonprofit leaders, this matters because compensation decisions send powerful signals—to donors, regulators, staff, and the public—about values and governance quality. Recent research on nonprofit board governance highlights how board composition shapes executive pay, offering practical guidance for organizations seeking to strengthen their governance practices.

Three Key Insights for Nonprofit Practice

1. Board Networks Shape Executive Influence

• One major finding is that CEOs who serve on multiple nonprofit boards—so-called interlocking directorates—tend to receive higher compensation. This can reflect the value of their experience and external connections. From a practical standpoint, boards should recognize that external board service can be both an asset and a source of influence.
• Practical application: Boards should explicitly discuss how external board roles factor into CEO evaluation and compensation. Rather than letting this happen informally, governance or compensation committees can clarify when board service is rewarded and when it may create distractions.

2. Executive Power and “Busy Boards” Weaken Oversight

• The study also shows that compensation rises when CEOs hold more power—such as serving simultaneously as board chair or remaining in office for long tenures. Similarly, boards composed of members who sit on many other boards (“busy boards”) are associated with higher CEO pay, likely because limited time and attention reduce monitoring effectiveness.
• Practical application: Boards should periodically assess their own capacity to govern. This includes reviewing leadership structure, setting thoughtful term policies, and being cautious about recruiting highly overextended trustees.

3. Women on Boards Strengthen Compensation Oversight

• Perhaps most striking, the research finds that greater representation of women on boards moderates the risks associated with busy boards. When more women are present, the link between busy boards and higher CEO pay weakens—suggesting stronger oversight and more rigorous discussion around sensitive decisions like compensation.
• Practical application: Gender representation is not only an equity goal; it is a governance strategy. Boards that invest in meaningful inclusion may improve decision quality, particularly around executive pay.

Conclusion: A Call to Action for Nonprofit Boards

Executive compensation is not decided in a vacuum. It reflects the power dynamics, networks, and diversity of the board itself. For nonprofit boards, the takeaway is clear: governance design matters. By paying attention to board composition, leadership structures, and inclusion, organizations can better align compensation practices with mission and public trust. Nonprofit boards should take time to review their own structures. By critically assessing board workload and leadership configurations, boards can make targeted improvements that meaningfully shape the quality of future governance decisions.

This article is one of many resources dedicated to strengthening the nonprofit sector. Please be sure to check out NCNE’s website and LinkedIn page to connect with other nonprofit leaders and support on making wise decisions in nonprofit leadership.