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Does it Pay to Pay? Why Compensating Your Board Members Could Be Good For Nonprofit Governance

It has been a longstanding opinion in the nonprofit sector that board members, as volunteers, should not be compensated. They are dedicating their time and resources for the good of the organization. Further, donors expect their funds to be spent directly on the mission, and not on anything that isn’t core to the mission. However, discourse on the matter is shifting as the sector begins to understand the advantages of compensating board members. We want to generate dialogue on this topic by highlighting some of these advantages and invite others to weigh in on whether nonprofit board members should be paid. Would it change engagement? Activity? Commitment? How should compensation be regulated? Answering the questions can offer insight into the ways the nonprofit sector sees itself moving forward. Here are some of our thoughts on the advantages of nonprofit board compensation:

Nonprofit Governance

1. Compensation Builds Diversity and Experience

Nonprofit boards tend to be comprised of individuals who can afford to donate their time freely and have access to funders, but as organizations look to shift towards a more strategic impact model, they need to attract other types of board members. Offering compensation opens board recruitment to a variety of people of different backgrounds and perspectives that aren’t normally reflected on a nonprofit board, helping your organization focus more on programmatic impact and less on fundraising. In an earlier Foundation News & Commentary article, Andrew Schulz and Ellen Bryson echo this sentiment by suggesting that compensation builds board diversity by “opening service up to individuals from different cultures, classes, ages, or personal situations who might not otherwise be able to serve as volunteers.” If a nonprofit is looking to increase community engagement, then it might be beneficial to include one or more of those community members on the board. In addition to bringing on community members, nonprofits might also attract other experienced individuals with specialized skills who can broaden mission and impact.

2. Compensation Increases Engagement and Accountability

Paid board members may feel a greater obligation to the mission, attending more board meetings and reaching out to donor networks more effectively. In his Winter 2008 President’s Note in Philanthropy magazine, William A. Schambra notes that, “At a minimum, paying a board member essentially establishes a contractual obligation on the part of a busy and otherwise distracted individual to continue to devote time and attention to the work of the [nonprofit].” In essence, it reminds the individual that serving on a board is a job.

3. Compensation Must Be Reasonable and Regulated

Who should decide whether and how much board members are to be compensated? Most likely it’s the governance committee’s responsibility, but deciding whether to compensate is just the first step in a process. The governance committee needs to consider:

  • How will the board establish fair and reasonable pay?
  • Is compensation tied to board member review?
  • How does board member evaluation impact compensation?
  • Is compensation an estimated flat fee, hourly rate, some other form?
  • What industries or benchmarks should the compensation be tied to?
  • Which board members should be compensated?

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Organizations need to determine what’s reasonable, document it, and be transparent about why they have chosen to compensate their board members. If they feel like board member compensation would further their long-term mission, then they need to convey this message in an understandable way to both stakeholders and the public. The idea of paying board members may rattle some, but to take the hardline view that it is wholly unacceptable misses the organization’s potential for creating lasting change and impact. A better approach—in our opinion—is to understand why the conversation keeps coming up and to investigate the merits of board compensation as a way of increasing impact in the nonprofit sector.

Resources

Bryson, Ellen and Andrew Schulz, “Board Debate: Voluntary or Compensated Boards?” Foundation News & Commentary, September/October 2003

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Anthony Tansimore

Anthony Tansimore

For more than twenty-five years Anthony Tansimore has been a senior leader in the nonprofit sector. In his various public and social sector roles he supported collaborative efforts among nonprofits and leadership development for management teams. Throughout his career Anthony has focused on assisting individual leaders and teams in becoming more effective in their own work.