Paying Nonprofit Board Members
In the realm of non-profit governance, the question of compensating board members is nuanced and contentious. Traditionally, board roles are voluntary, emphasizing the altruistic commitment of members to the organization's mission. However, some argue that compensation could professionalize boards, potentially attracting a higher caliber of talent and enhancing governance effectiveness.
This last week, I ran into this exact situation. A friend of mine is new to a nonprofit. It turns out that their board members are paid… well paid. And reimbursed for the travel to meetings. I was completely caught off guard. So was my friend. But it caused me to think…
The IRS stipulates that non-profit organizations can pay board members for their services as long as the compensation is "reasonable and not excessive." The key is that any payment aligns with the organization's charitable purpose and does not result in private benefit (IRS Publication 557). The rationale is that reasonable compensation can help ensure dedication and professional expertise, aspects that are particularly critical in large, complex non-profits where the board's role involves significant legal and financial responsibilities.
Critics of this approach caution that paying board members might dilute the philanthropic spirit, converting what should be a purely charitable governance role into a business-like transaction. This could potentially alienate volunteers and donors who perceive the non-profit's motives as less than purely altruistic. Furthermore, compensating board members could complicate the public’s perception of the organization, as noted by BoardSource.com, a recognized leader in non-profit board leadership and support. They argue that maintaining a voluntary board helps affirm the non-profit's commitment to using its financial resources directly towards its mission.
Proponents, on the other hand, argue that compensation can address equity issues, making board service feasible for individuals who might not otherwise afford to volunteer their time without remuneration. This can be particularly important for inclusivity, broadening the diversity of perspectives and experiences on the board, which can enhance decision-making and strategic oversight.
The debate overcompensating non-profit board members remains a pivotal issue, reflecting broader questions about the evolving role and expectations of non-profit governance in addressing complex societal challenges. In the end, I find it hard to justify. How does a nonprofit fundraising team go out and ask for money when some of that money is being paid to the board members. And consider this…how does the board member “refer” a friend to the organization, possibly leading to a philanthropic discussion, when the board member is paid? The issues involved with paying board members, to me, are too great to deal with and still have the organization to be successful.
I am “no” on this issue.
