Editor’s Note: This op-ed is by Don Keelan, a trustee of the Keelan Family Foundation in Arlington.
There is an adage within the nonprofit world that trustees who serve are called upon to do so because their time, talent and treasure are needed—added to which Rob Reich, co-director of the Stamford University Center of Philanthropy, recently said: “(nationally)…in the past 20 years, 135 nonprofits are started every day.” .
Here in Vermont, with thousands of nonprofits registered with the secretary of state, it is not surprising that recruiting qualified trustees to serve on boards (and attend meetings) has become a critical issue. And if the state’s nonprofit organizations continue to grow, the pool of qualified trustees will become even smaller. Therefore, is it time to visit the premise of having some form of monetary compensation given to those who serve as trustees of our nonprofit organizations?
Before I discuss the pros and cons of providing compensation to trustees, it might be helpful to note some facts.
As foreign as it might seem, compensating trustees is carried on by many private tax-exempt foundations. Also, it is not unusual for large nonprofit healthcare insurance organizations to provide their board members with compensation. Here in Vermont, and I assume in other states as well, board members who serve on town/city governing boards are paid, albeit not very much, for their service on a town’s board or school board.
So what exactly are the pluses for compensating board members? Certainly, it would attract more qualified people to serve on boards. According to a recent article in the Chronicle of Philanthropy, the Nellie Mae Education Foundation, of Quincy, Mass., has a compensation package for its 15 board members; the annual dollars paid range from a low of $19,000 to $32,000. There are others as well.
Of course another reason for compensating board members is for the organization to demonstrate its appreciation for the time, dedication and talents that board members provide—and not just be taken for granted. Not all nonprofits are alike, and some are much more complicated where the trustees assume a higher risk of personal liability (over and above what might be covered by directors and officers liability insurance).
On the other side of the equation, paying trustees for their time removes the sense of service—of volunteering, the very foundation of our country’s nonprofit sector.
Without a doubt, compensating trustees would be for many nonprofits an added burden, especially here in Vermont. It would also create an unhealthy environment of competition—which nonprofit will pay more for board member services?
For many nonprofits there is a middle ground that is often (sometimes too often) used. To pay for the talent (and objectivity) that is not available “in-house” or on its board, they hire consultants. Paralleling the phenomenal increase in nonprofits over the last decade has been the growth in consulting firms that service this sector of the economy. So in essence, nonprofits are in many instances willing to pay for talent.
Today, to serve as a trustee of a nonprofit organization is not exactly the same as it was a generation ago. Aside from the complications of a specific organization, there is the external government agencies that have entered into the practice. Namely, state attorneys general, the Internal Revenue Service (IRS) and the Office of Management and Budget (OMB).
These agencies, in carrying out their mandates, have been known to go after board members for failing to follow the “rules” or failing to exercise their role as the organization’s governing body. One only has to look at the revised Form 990 (the annual tax return filed by nonprofits). The IRS has inserted itself, deeply, into how a nonprofit is governed.
As reported in the June 30, 2011 issue of the Chronicle of Philanthropy, nonprofits that don’t compensate its trustees have a friend in Massachusetts. That state’s attorney general, Martha Coakley, is out to ban nonprofits from compensating board members. Her proposed legislation is being watched closely throughout the country—by those who are impacted by the issue of whether to pay or to not pay board members.
Sooner of later the issue of compensating board members needs to be addressed. It is one thing to be called upon to serve on the board of a local historical society and another to serve on the board of Fletcher Allen Medical Center—both require dedication and volunteerism— however the time commitment, complexity and liability are what makes a difference.
