Boards & Governance

Board Compensation

council-webteam — Sun, 17 Nov 2013 18:50:44 +0000

Board Compensation council-webteam Sun, 11/17/2013 - 13:50

Board Compensation

Introduction

Should your foundation board members be compensated for service, or should they serve in a voluntary capacity? Whether you are considering this issue for the first time, or whether it’s a question that has arisen before, compensation has become more than an internal management question. It has become part of keeping the public trust.

A note on Excessive Compensation
The Council board of directors is firmly opposed to excessive or unreasonable compensation. Even the public perception of excessive compensation can be damaging to the entire field of philanthropy.

What follows is a description of the basic legalities of compensation, a sampling of the most common practices and a breakdown of the pros of both compensated and voluntary board service. Unless otherwise noted, the word “compensation” throughout this brief refers to payment for overall board service and should not be confused with reimbursement for expenses such as travel or professional development, or compensation for professional services such as investment management, accounting or legal advice.

What is legal?

Under federal law, all types of foundations are allowed to compensate their boards as long as the compensation is reasonable. The source of the regulation differs, however, depending upon whether the foundation is private (such as independent or family foundations) or whether it is public (such as community foundations). Private foundations must keep compensation “reasonable” under the self-dealing rules. A similar obligation applies to community and other public foundations under the intermediate sanctions regulations. Regardless of the defining rule or regulation, however, “reasonable” for all foundations is determined through comparisons of what similarly situated people are paid for similar work.

Who compensates?

Even though compensation is legal, less than a quarter of foundations pay some or all of their trustees for their board service. Many nonprofit board members view their board service as an extension of their public service. The percentage, according to the Council on Foundations’ Foundation Management Reports, has stayed fairly even over the past two decades. In its 2007-2008 Member Survey Report, the Association of Small Foundations reported a somewhat higher percentage. Of the survey respondents, 31 percent compensate their boards.

Both studies show that compensation practices vary by type and size of foundation. Of all the foundation types, independent foundations offer compensation more frequently and at higher levels. Community foundations, on the other hand, rarely, if ever, compensate their board members. Somewhere in the middle are family foundations which are frequently unstaffed and whose board members often fulfill a variety of staff and management functions.

Typically, the larger the foundation, the more likely they are to compensate.

The chart below gives a quick overview of the common practices by the different types of foundations.

Community	213	1.40%
Family	114	31.60%
Independent	138	58.70%
Public	53	7.50%
All	518	23.90%

Source: Council on Foundations Foundation Management Series, 2010 Edition, Board Composition and Compensation.

What do you pay for?

If your practice is to compensate, it’s important to know and document what you (and others like you) are paying for. The work board members are compensated for varies from foundation to foundation depending upon factors such as asset size, spending level, program complexity, staff capabilities and foundation culture.

Some trustees receive an annual fee in payment for performing a broad oversight role. Sometimes, in newer boards or boards without staff, members may be paid for being involved operationally and taking on part or all of typical staff functions. Occasionally, individual board members may perform specific professional services—legal, accounting, investment management or advisement—but rather than be paid on a fee-for-service basis, compensation for those duties are rolled into their annual compensation. Note that these “personal services” must be reasonable and necessary to the foundations work, and compensation for these services may not be excessive.

There are also some foundations that compensate their boards for attendance at each board or committee meeting.

Among those foundations that compensated board members, 81.1 percent used some combination of set fees, with most paying an annual fee (60.6 percent) and/or a fee per board meeting (64.6 percent).

How much should you pay?

While remembering that what is typical changes depending upon the type and size of a foundation, statistics suggest that the overall actual, nominal amount of board compensation has increased at a slow but steady rate since 1986, while the real data in the chart below suggests a slow but steady decrease in the last decade.

1986	$4,500	$4,500	Both the Council on Foundations and the Association of Small Foundations have collected information on the amount and type of trustee compensation. Although neither study is a comprehensive indicator of current practices for all foundations, they both list ranges to help you determine whether your compensation practices fall within the norm.
1988	$5,000	$4,632
1990	$6,000	$5,031
1992	$5,000	$3,906
1994	$8,000	$5,916
1997	$6,300	$4,302
1999	$10,000	$6,579
2001	$10,000	$6,189
2003	$10,000	$5,957
2006	$12,000	$6,524
2009	$11,000	$5,620

Source: Council on Foundations, Foundation Management Series, various years.

But how do you determine what is reasonable and fair within the range? Most foundations have specific criteria by which they determine how much to pay. Factors that affect compensation include the following:

Size and anticipated growth of the foundation’s current assets
Number and amount of the grants and the frequency of the grant making process
Experience and management responsibilities of the board member
Amount of time spent on foundation matters
Complexity of the foundation
Independence of the individuals who establish the compensation level

Finally, for those who do compensate, it’s important to remember that, under federal law, all board compensation must be reported on the IRS form 990 or 990-PF. This information must also be made available in some form to the public.

Should you or should you not compensate?

Assuming you work within accepted compensation levels, there are a number of arguments for either practice.

The Case for Compensated Boards:

The Case for Voluntary Boards Quality of member: Compensation is needed in order to attract quality candidates. Too often, people with high visibility and valuable contacts won’t serve without pay.
Technical expertise and talent: A board is often expected to bring a level of sophistication to complex topics. Compensation helps attract individuals with strong technical, professional or subject matter expertise.
Risk: There are personal and professional risks inherent in board service. Compensation may help tip the balance in favor of serving.
Loyalty: A paid person is less apt to take advantage of board service for personal gain. Being compensated might strengthen one’s obligation to duty.
Interest: Because trustees, like anyone else, have only so much time, compensation may help sustain their interest, helping them to be more responsive and pay greater attention to their board responsibilities.
Equal pay for equal work: Both trusts and for-profit boards have a history of paying their trustees. Since the obligations and responsibilities are similar for foundation boards, why shouldn’t they be paid the same for the same work?
Diversity: Compensation promotes the recruitment of a diverse board. It opens service up to individuals from different cultures, classes, ages or personal situations who might not otherwise be able to serve as volunteers.

The Case for Uncompensated Boards:

Inspired board members: Serving without compensation encourages board members to express their philanthropic values, encourages altruism and places public benefit above self-interest.
Charitable resources: Board compensation reduces the amount of money available for grants and programs. Money not spent on compensation frees up resources to further the foundation mission.
Fairness: Public charities rarely compensate their boards. Since the obligations and responsibilities of foundation boards are essentially the same, why should they be paid?
Public trust: Compensation sends the wrong message and erodes the quality of public perception. Foundations should be particularly concerned about the models they present.
Conflict of Interest: Because volunteers aren’t paid, they are free from potential conflict that might result from trying to protect an income stream. Therefore, they are less susceptible to conflicts between what is the right thing to do and what is in the best interest of those who are signing their paycheck.
Leadership by example: Foundations often expect grantees to make the most of their charitable dollars, including keeping their administrative overhead low and using volunteer boards. A foundation can set the tone by modeling the same behaviors.

In Sum, Ask Yourselves

What is our practice when it comes to compensating our board?
How do we compare with other foundations that are of similar type and size?
How does public perception shape our views?
How do we document compensation on our IRS Form 990 or 990-PF?

Questions?

Connect with Council Staff

Boards & Governance

Human Resources & Operations

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New Executive Leaders Roundtable - October 2023

marlee.clayton@cof.org — Wed, 06 Sep 2023 14:50:28 +0000

New Executive Leaders Roundtable - October 2023 marlee.clayton… Wed, 09/06/2023 - 10:50

Peer Event

New Executive Leaders Roundtable - October 2023

Join this virtual roundtable for new CEOs, presidents and executive directors to connect with peers around the vital role that private and corporate foundation leaders play in bridging across differences and building common ground in our communities.

Building Common Ground in Private and Corporate Philanthropy

Foundation leaders are key levers of change: uniquely positioned to advance change in their organizations, their communities and the broader field. The Council is excited to offer this program to provide support to leaders who joined their organization or started their role since the pandemic began.

This virtual session delves into the role that private and corporate foundations play in bridging differences and building a sense of belonging in their communities – and how new executives are embracing and embodying it.

This interactive roundtable will allow new foundation executives to share experiences, solve problems, and support one another in a peer learning space.

Come join us to:

Connect with other new leaders in philanthropy;
Explore what this current environment requires of leaders in the sector;
Examine the unique calling of foundation executives to bridge differences and build common ground in their role.

If you're a new executive leader and are interested in learning more about this or our other programs, please get in touch with Marlee Clayton, Executive Office Manager.

Moderator

Kathleen Enright

President and CEO

Council on Foundations

Questions?

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Boards & Governance

Leadership Development

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Retreat for New Community Foundation Executive Leaders - In-Person - August 2023

marlee.clayton@cof.org — Thu, 22 Jun 2023 18:28:33 +0000

Retreat for New Community Foundation Executive Leaders - In-Person - August 2023 marlee.clayton… Thu, 06/22/2023 - 14:28

Retreat

Retreat for New Community Foundation Executive Leaders - In-Person - August 2023

Registration now open

This retreat equips new community foundation executives with the skills and relationships needed to be successful in their early years, including the work of bridging across differences and building common ground in communities and philanthropy.

Date & Time

August 23 – 24, 2023

Location

Hartford Foundation for Public Giving 10 Columbus Boulevard, 8th Floor,
Hartford CT 06106

Cost

Council Members = $499
Nonmembers = $999

This event is intended for executive leaders (CEOs, Presidents, Executive Directors) of mid- and large-sized community foundations who have been in their role for four years or less.

With more than 360 community foundations in its membership, the Council on Foundations recognizes the vital role that their leaders play in in their communities to collaborate across sectors, bridge differences, and fund important initiatives. Foundation executives are key levers of change in this work: uniquely positioned to advance change both internally within an organization and externally through the organization’s strategy and impact.

The Council is convening this inaugural retreat to equip new foundation executives with the skills and relationships needed to be successful in their early years. Hosted by Jay Williams and the Hartford Foundation for Public Giving in Connecticut, it will take place from noon on August 23 and to 1:00 pm ET on August 24, 2023. Over the two consecutive half-day sessions, attendees will delve into the practical and topical issues facing new community foundation executives.

The agenda provides space to garner wisdom and lessons from other leaders, set goals and participate in peer coaching, share proven tips and resources, and explore the role of community foundation leaders in connecting and collaborating across difference. The sessions will address common challenges and opportunities around finding one’s feet as a new leader, bringing participants in fellowship with those at differently sized and situated community foundations.

Retreat objectives:

Explore core skills, attributes and change management challenges for early-tenure foundation executives;
Facilitate exchange of lessons from seasoned philanthropic leaders and local nonprofit leaders;
Support peer coaching on top-of-mind leadership challenges;
Address needs for specific trajectories leading to the foundation executive role (outside sector, inside sector, internal promotion);
Exchange range of tips/resources for new foundation executives;
Examine role of community foundation executives in bridging across differences and building common ground.

Questions?

Connect with Council Staff

Boards & Governance

Human Resources & Operations

Leadership Development

Mission, Vision & Values

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New Executive Leaders Roundtable - April 2023

marlee.clayton@cof.org — Mon, 03 Apr 2023 15:23:40 +0000

New Executive Leaders Roundtable - April 2023 marlee.clayton… Mon, 04/03/2023 - 11:23

Peer Event

New Executive Leaders Roundtable - April 2023

Join this virtual roundtable for new CEOs and executive directors to connect with peers around the vital role that community foundation and place-based leaders play in bridging across differences and building common ground in our communities.

Building Common Ground in Community Philanthropy

Foundation leaders are key levers of change: uniquely positioned to advance change in their organizations, their communities and the broader field. The Council is excited to offer this program to provide support to leaders who are relatively new to their leadership role, organizations, and/or the foundation sector.

This virtual session delves into the role that community and place-based foundations play in bridging differences and building a sense of belonging in their communities – and how new executives are embracing and embodying it.

This interactive roundtable will allow new community and place-based foundation executives to share experiences, solve problems, and support one another in a peer learning space.

Come join us to:

Connect with other new leaders in community and place-based philanthropy;
Explore what this current environment requires of leaders in the sector;
Examine the unique calling of community and place-based foundation executives to bridge differences and build common ground in their role.

Featuring:

Peer Discussion Lead

Mendi Blue Paca
President & CEO
Fairfield County’s Community Foundation

Moderator

Kathleen Enright
President and CEO
Council on Foundations

Moderator

Daniel Lee
Executive in Residence
Council on Foundations

If you're a new executive leader and are interested in learning more, please get in touch with Marlee Clayton, Executive Office Manager.

Questions?

Connect with Council Staff

Boards & Governance

Leadership Development

Related Events

Related Resources

2022 Grantmaker Salary and Benefits Report: Board Compensation Tables

JasonLudwig — Wed, 05 Oct 2022 13:47:24 +0000

2022 Grantmaker Salary and Benefits Report: Board Compensation Tables JasonLudwig Wed, 10/05/2022 - 09:47

2022 Grantmaker Salary and Benefits Report: Board Compensation Tables

The 2022 Board Compensation Tables provide foundation board and staff with the tools they need to benchmark their board compensation policies and practices against peers in the field. This report contains data collected through the Council’s 2022 Grantmaker Salary and Benefits Survey and presented by foundation type, asset group, and U.S. Census region. It also includes updated guidelines for determining reasonable compensation for foundation directors and trustees.

Members, Download the Tables for Free

Nonmembers, Purchase the Tables

Member price

$0.00

List Price

$99.00

Questions?

Connect with Council Staff

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2019 Grantmaker Salary and Benefits Report: Board Compensation Tables

council-webteam — Thu, 02 Jan 2020 14:02:18 +0000

2019 Grantmaker Salary and Benefits Report: Board Compensation Tables council-webteam Thu, 01/02/2020 - 09:02

2019 Grantmaker Salary and Benefits Report: Board Compensation Tables

The 2019 Board Compensation Tables provide foundation board and staff with the tools they need to benchmark their board compensation policies and practices against peers in the field. This report contains data collected through the Council’s 2019 Grantmaker Salary and Benefits Survey and presented by foundation type, asset group, and U.S. Census region. It also includes updated guidelines for determining reasonable compensation for foundation directors and trustees.

Members, Download the Tables for Free

Nonmembers, Purchase the Tables

Member price

$0.00

List Price

$99.00

Purchase in Store

Questions?

Connect with Council Staff

Related Events

Community Foundation Legal Webinar

kelsey.gerber@cof.org — Thu, 16 Nov 2017 14:43:47 +0000

Community Foundation Legal Webinar kelsey.gerber@… Thu, 11/16/2017 - 09:43

Community Foundation Legal Webinar

Webinar Recording

View the Webinar Slides

Community Foundations: Gearing up for Year-End

Spend 90 minutes with the Council's legal staff to explore topics associated with year-end. As well, take a moment out to celebrate #CFWeek and gear up for #GivingTuesday!

Topics Include:

Year-end gift acceptances
Board Governance and Standards for 2018
Prepping for internal audits
Celebrating #CFWeek and #GivingTuesday
Question & Answer

Agenda

Introductions & Welcomes
Top 10 Legal Questions received for Year-end gift acceptances
3 Key considerations for Board/Mgmt for year-end budgetary and regulatory
Top Governance Issues | National Standards for 2018
Considerations as you close the books; prepping for internal audits
Calendar of Activities for Board Governance
Celebrating #CFWeek and #GivingTuesday
Question & Answer

Speakers

Brian Crowe, CFO
Bryan Del Rosario, Staff Counsel
Christina Gonzalez, Interim Executive Director of National Standards and Staff Counsel
Brad Ward, Director, Community Philanthropy

Questions?

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Boards & Governance

Development & Gift Management

Finance & Accounting

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Governance and Compliance Issues for Foundation Financial Management

stephanie.mcgencey@cof.org — Thu, 19 Nov 2015 21:14:58 +0000

Governance and Compliance Issues for Foundation Financial Management stephanie.mcge… Thu, 11/19/2015 - 16:14

Governance and Compliance Issues for Foundation Financial Management

This white paper provides a review of critical governance issues that foundations must consider to remain in compliance with prevailing and emerging laws and regulations. Readers can expect content focused on trustee fiduciary responsibilities as relates to duties of care, loyalty, and responsibility.

Download Document

Governance and Compliance Issues for Foundation Financial Management

Questions?

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10 Things Every New Foundation Board Member Should Know

John Cochrane — Fri, 17 Jan 2014 15:46:07 +0000

10 Things Every New Foundation Board Member Should Know John Cochrane Fri, 01/17/2014 - 10:46

10 Things Every New Foundation Board Member Should Know

The Council on Foundations, in collaboration with BoardSource, created this easy-to-use guide for new foundation board members.

Download Document

10 Things Every New Foundation Board Member Should Know

Questions?

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A Compliance Checklist for Private Foundations

council-webteam — Mon, 16 Dec 2013 21:54:44 +0000

A Compliance Checklist for Private Foundations council-webteam Mon, 12/16/2013 - 16:54

A Compliance Checklist for Private Foundations

The persistent scrutiny of nonprofit governance has prompted leaders at many types of organizations to take steps to assure that their own houses are in good legal and financial order. This checklist is a good place for you as a private foundation to start.