The ceo of the red cross makes $600k, with plenty of the execs making over $400k (form 990 available [1]; page 49). I don't know if I can draw a bright line, but I think that's excessive compensation for running a medical charity.
Let's say that we put a cap in there: no executive in the Red Cross can make more than $200k. Let's further say that, over time, the quality of the executives goes down as a consequence, to the point that the Red Cross is less effective at its mission. So, we have a compensation cap that "feels" more appropriate for a medical charity, but the charity is now less capable of accomplishing its mission. Do you think this is an improvement?
Now, I am not saying this is necessarily what will happen, but it's certainly possible. I also assume that executives at the Red Cross are already making less than what they could at for-profit companies. Non-profits have to compete with for-profits when it comes to employees; that's just a natural consequence of how labor and capital exist in our economy. I think this means that we will sometimes have to pay employees at non-profits more than what "feels" right in order to have good, competent employees.
Let's say we can the glibertarian nonsense, because anything is possible (under your metric of oh, it may not happen... but it's possible). Why, we should pay the executive $10m/year -- because otherwise, the quality of the executives will go down, to the point that the Red Cross is less effective at its mission. I'm not saying this is necessarily what will happen, but it's certainly possible.
I'm actually far from a libertarian. I want strong government regulation in many areas (finance, food, healthcare, etc.), a broad social safety net (which would ideally include government healthcare for all), and I'm willing to raise taxes to achieve all of those.
But we do live in a capitalist society. So we have to, well, live with it. And part of living with it is recognizing that private entities that do work we would typically consider for the greater good of society have to compete against entities that exist for their own benefit. The reason that they don't pay the execs at the Red Cross more is that the rate of $600k is arrived at through a combination of what they have to pay to get a good executive, what they can pay, and the pay cut the execs are willing to take to work at a non-profit with high social value.
My argument is that the pay they've arrived at balances all of those things, and if we tried to cap it, we could harm the mission. Your argument is that the pay they've arrived at feels wrong, and we should ignore the dynamics of the labor market for execs.
They pay nothing for their by far most important input, and in fact actively guilt people into giving it to them. For free.
You also appear to have a, well, econ for the gullible version of how executives get paid. Reality is much closer to managing to stack the board with friends, etc -- read eg Jack Welch.
Your argument about the dynamics of the labor market for execs is specious -- arrived at by assuming the current state, then proceeding to demonstrate the current state is necessarily optimal because we are in it.
Ok, propose an alternative scheme of executive pay. Does it work? How about the head of the French Red Cross or Doctors without Borders: how does their pay compare?
Surely we all expect a charitable organization like ARC to pay market rates for electricity, paperclips, postage, clerical personnel, and medical technologists. Why should they not pay something approaching market rates for executive leadership? I'm certain a corporate CEO of the caliber needed to run ARC would command well over a million in salary plus stock options, so they are already well under the market.
