Off the back of last week's post, we want to talk a bit more about compensating individuals for serving on your nonprofit's board.
As we mentioned last week, most nonprofits choose not to pay board members. That being said, some nonprofits choose to compensate their members. There are a number of reasons for this:
- using compensation to encourage active and committed individuals to serve on a board
- the nonprofit is a complex system that requires significant input from board members (e.g., residential treatment center or health care organization)
Once a decision has been made to pay board members, it is important to put certain structural elements in place.
Clearly state compensation policy in the bylaws
Before compensating board members, the nonprofit's bylaws should clearly permit this. If they don't, the board should vote to amend the bylaws so that compensation is allowed. It is important to document why a nonprofit has decided to compensate board members, and how compensation will be established.
Establish a conflict of interest policy
Just as important is establishing a clear conflict of interest policy. For example, can family members on the board be paid? Keep in mind that the board has a legal responsibility to act in the best interest of the nonprofit. A clear conflict of interest policy can help the board deal with situations where individuals stand to financially gain from serving on the board.
Work compensation into the budget
It's also very important to work out how realistic it is for the nonprofit to raise enough money to pay board members. Will there be enough money to offer the nonprofit's programs and pay the board? If compensation takes up a considerable portion of a nonprofit's budget, it might be wise to switch strategies. Donors want assurance that their money is supporting a particular cause or issue, and could get turned off if they realize their money is going towards board salaries.
There are a number of issues to consider in deciding whether to pay board members. If you are interested in exploring whether board compensation is right for you, don't hesitate to get in touch. We are an email away at firstname.lastname@example.org.
Standing for your nonprofit's success!
Erica & Bea