What Is an Executive Director?
An executive director is the senior operating officer or manager of an organization or corporation, usually at a nonprofit. Their duties are similar to those of a chief executive officer (CEO) of a for-profit company. The executive director is responsible for strategic planning, working with the board of directors (B of D), and operating within a budget.
Key Takeaways
- An executive director is the senior operating officer or manager of an organization or corporation, usually at a nonprofit.
- Similar in many ways to the CEO role in a for-profit corporation, executive directors are responsible for steering the organization and managing its operations.
- Because of IRS rules for nonprofit status, executive directors often receive lower total compensation than a CEO.
Understanding an Executive Director
Executive directors report directly to the board and are responsible for carrying out the board's decisions. Although an executive director is also involved in the day-to-day management of the organization, these duties may be shared with a chief operating officer (COO).
Executive directors of nonprofit organizations (NPOs) are usually involved with fundraising efforts, as well as the promotion of the organization in order to raise public awareness and boost membership.
The B of D may appoint an executive director, and in some cases, the vote must be approved by a specified percentage of the membership. Most executive directors are paid; however, for very small NPOs, the position may be on a volunteer basis only.
Nonprofit Organizations (NPOs)
An NPO is a business that has been granted tax-exempt status by theInternal Revenue Service (IRS)because it furthers a social cause and provides a public benefit. Donations made to an NPO are typically tax-deductibleto individuals and businesses that make them, and the nonprofit itself pays no tax on the received donations or on any other money earned through fundraising activities. NPOs are sometimes called 501(c)(3) organizationsbased on the section of the tax code that permits them to operate.
A nonprofit designation andtax-exempt statusare given only to organizations thatfurther religious, scientific, charitable, educational, literary, public safety, or cruelty-prevention causes or purposes. Common examples of NPOs include community hospitals, public universities, national or regional charities, local libraries, churches, and foundations.
Nonprofits are allowed to provide assets or income to individuals only as fair compensation for their services. Indeed, the organization must explicitly state in its organizing papers that it will not be used for the personal gain or benefit of its founders, employees, supporters, relatives, or associates. As a result, executive directors of nonprofits have salaries that are, on average, far less than corporate CEOs.
