You make a good point and are basically correct in your observation.  Private inurement is an improper economic advantage to an insider, such as an officer or director, of a charity.  A charity is prohibited from providing private inurement and can lose its exemption if it does so.

Losing exempt status, of course, is a very harsh penalty and can cause an organization to go out of business.  In order to provide the IRS with an “intermediate sanction” that would allow it to correct improper conduct without killing the organization, Congress passed the excess benefit tax provisions in the mid 1990s.  The IRS can now impose an excess benefit tax on any “disqualified person” who obtains more from the charity than he or she gives in return, and on any manager who knowingly approves it.  (See Ready Reference Page:  “Charities Must Avoid Excess Benefit Transactions.”)

It is now possible for the IRS to impose serious penalties on the wrongdoers without revoking the exempt status.  The IRS has issued some regulations that sort of spell out how egregious the excess benefit situation has to be before it will actually revoke exempt status.  It says it will make its decision based on all of the facts and circumstances.  (See Ready Reference Page:  “IRS Proposes New Regulations to Clarify Basis for Revocation of Exemption.”)