Principle 20

Board members are generally expected to serve without compensation, other than reimbursement for expenses incurred to fulfill their board-related duties. A charitable organization that provides compensation to its board members should use appropriate comparability data to determine the amount to be paid, document the decision, and provide full disclosure to anyone, upon request, of the amount and rationale for the compensation.

The vast majority of board members serve without compensation, although some organizations reimburse travel costs and other expenses necessary to ensure board members are able to participate in board functions. In fact, board members of public charities often donate both time and funds to the organization, a practice that supports the sector’s spirit of giving and volunteering.

When organizations find it appropriate to compensate board members due to the nature, time, or professional competencies involved in the work, they must be prepared to provide detailed documentation of the amount of and reasons for such compensation, including the responsibilities of board members and the services they provide. The amount of compensation for each board member, and whether a board member received a grant or other assistance from the organization, must be reported on the organization’s IRS Form 990. Any compensation provided to board members must be reasonable and necessary to support the performance of the organization in its exempt function. Compensation paid to board members for services in the capacity of staff of the organization should be clearly differentiated from any compensation paid for board service.

Board members of charitable organizations are responsible for ascertaining that any compensation they receive does not exceed the compensation provided for positions in comparable organizations with similar responsibilities and qualifications. When they establish their own compensation, board members generally cannot be considered independent authorizing bodies and therefore generally cannot avail themselves of the legal protections accorded to such bodies. Nonetheless, boards that do provide compensation for some or all of their members should seek independent data, such as surveys available from national and regional associations or compensation consulting firms, to substantiate the reasonableness of the compensation they provide, and should review compensation decisions on an annual basis.