Ask the Center: Board Compensation (April 2008)


Q: Should we pay the trustees of our family foundation?

A: The National Center for Family Philanthropy neither advocates nor opposes board compensation. We hold the position that any foundation policy or practice, including board compensation, should help the foundation further its mission, values, and charitable goals.

Legally, trustees of family foundations are often eligible for compensation, provided that it is for services that are necessary to the charitable operations of the foundation, and that the amount is reasonable for the services provided.

The decision to compensate board members, then, largely depends on your values and circumstances. Some foundations may choose to offer board compensation to recognize the extraordinary service of individual trustees, to encourage participation of younger family members and branches of the family that are less financially secure, or to attract committed and experienced non-family members to the board. Others choose not to compensate because they are concerned such a practice might go against the founder’s wishes, might put the foundation in an unfavorable light, or might introduce a new set of financial issues that could be a source of tension. Some foundations find it inconsistent to pay their own boards when the boards of the nonprofits they fund serve voluntarily.

If you decide to compensate your board members, it is extremely important that your board work with its legal advisors to develop a clear, fair policy on compensation (and reimbursement) in light of its mission, values, and the implications of such compensation for the field at large. It is also critical that individual board members keep careful record of the time spent and services provided to the foundation.

For more on board compensation, see the National Center’s issue paper Board Compensation: Reasonable and Necessary?, available free to  Friends of the Family and FP Online subscribers through the FP Online Knowledge Center and available for purchase in our bookstore.

 

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