For decades, the perception of executive pay at nonprofit organizations has been the image of a grossly underpaid executive director OR a scandalously overpaid CEO. But as the social sector matures, becomes more professional and finds meaningful ways to measure success, executive compensation is developing a new image. With the influence of engaged boards and thoughtful hiring and retention practices, nonprofits are poised to offer more competitive and attractive compensation packages than ever before.

Historically, executives at America’s nonprofits have felt pressure to take a nonprofit discount in pay in exchange for the psychic benefit of charity work. But is virtue truly its own reward? Does it compensate for lower compensation? As the line between sectors blurs, nonprofits compete more and more in the marketplace for top talent. Unlike the for-profit sector with their bottom-line focus on profits, nonprofits have a double bottom line that requires them to view all decisions (including hiring and executive compensation) against both a financial bottom line and a socially responsible bottom line. Limited resources, social pressures, and board biases may contribute to lower compensation. Even the IRS plays a role in determining what nonprofits can pay their executives.