Keeping it Ethical is our weekly blog series highlighting the 33 Principles for Good Governance and Ethical Practice. Throughout the series, we hope to highlight the importance of each Principle and the helpful resources associated with it and learn more from you about how you’ve incorporated these Principles into your charitable organization.
Of the 19 Principles we’ve highlighted so far in this series, the last 12 have focused on various aspects of effective governance, and could have just as easily fallen under “All About Boards” as a theme name. While I’d love to be clever and say this newest board-related blog is “All About the Benjamins,” nothing is further from the truth.
In fact, most nonprofit board members receive little more than an appreciative “thank you” in return for fulfilling the many responsibilities of board service, including:
- setting organizational vision and mission,
- ensuring organizations fulfill obligations to donors, staff, volunteers, clients, and the public,
- keeping the organizational mission aligned with community and program needs,
- establishing broad policies and strategic direction,
- protecting organizational assets,
- ensuring organizations’ financial, human, and material resources are used appropriately to further their missions
- establishing a risk tolerance level that is appropriate for organizational operations,
- setting policies and procedures to ensure that activities and operations of associated affiliates, chapters, or branches are consistent with organizational values and missions,
- and for smaller organizations with little or no staff, being directly involvement in overseeing and delivering programs and services.
Of course, then there are those pesky regularly scheduled meetings to attend, committees to serve on, reports to draft and deliver, oversight and evaluation of CEO performance, staying on the right side of legal and ethical concerns, and the list goes on.
Now imagine doing all of that — without compensation.
Further, while board members may sometimes be reimbursed for board-related expenses such as travel, for the most part they are expected to donate their time and funds to the organization they serve. After all, isn’t giving and volunteering what the sector’s all about?
Sometimes a board member holds a special competency or training that is beneficial to their board service, and in those cases, nonprofits may choose to compensate the member for services rendered. Boards that choose to compensate some or all their members would do well to check out independent data to validate that the compensation is permissible and reasonable.
Generally speaking, nonprofit organizations that compensate board members must follow stringent requirements – including documenting the services provided, along with the amount and reason for the compensation. Also, they must report compensation-related information on Form 990.
Luckily, when it comes to board compensation guidelines and requirements, a myriad of resources exist to help organizations avoid both perceived and legal missteps. Here are just a few:
- Can board members be paid? National Council of Nonprofits
- Should Board Members of Nonprofit Organizations Be Compensated? ASAE: The Center for Association Leadership
- Compensation of Nonprofit Board Members and Board Immunity, Whitted, Takiff & Hansen LLC
- What Is Reasonable for Nonprofit Board Pay? Economic Research Institute
Need more reference sources? Look no further than Independent Sector’s Principles Resources Center.