Board members for an enterprise receive compensation for their time and expertise. It is an expected cost for oversight. The balance point is to compensate enough to capture a board member's complete attention. Less, and the type of board member you want will not be available or interested. Too much and board members become sorely tempted to preserve their board seats for the sake of the money. Establishing a policy for how board compensation is determined becomes essential. Some companies do this through a board subcommittee. Other companies draw on consultative expertise to set board compensation tied to company performance, not just a wage for time served.
Board members in the nonprofit sector usually offer their time and expense at no cost to the organization. A nonprofit's decision to compensate board members usually runs against the grain of donor development and prevents board members from engaging in fundraising efforts with integrity. Establishing a policy for board member reimbursement for any expense is important, so is communicating this policy as part of the recruitment process.
At first glance, this seems entirely equitable. Board members of an enterprise are compensated equally, and all board members of a nonprofit or ministry organization donate their time equally when attending a meeting. A closer look, however, shows that many nonprofit board members contribute unequally.
This inequality does not have to be a problem. Instead, it can boost how the organization thanks its board members for their service and deepens the relationship for years to come, especially when acknowledged.
But what inequality, you say?
Consider this illustration: Community Development Inc. has a seven-member board. Three are appointed by the founding Credit Unions, who established the nonprofit organization to provide relief for financially stressed families. One board member is seated by the Mayor's office with the expectation they must serve in a nonpartisan role. In addition, the Board appoints two board members- usually a clergy representative and a business or industry owner in the community. The Executive Director of Community Development, Inc. also serves as a board member.
Consider the cost to participate for each:
- Community Development, Inc. compensates the Executive Director as part of her job.
- The founding credit union members are on a salary and serve as part of their job description. Their credit union likely covers their mileage to participate. They serve the community, but no personal cost is involved.
- The appointed member from the Mayor's office also serves as an extension of their employment. They bear no personal cost.
- The clergy member may or may not be serving under the terms of their employment. Often, they do so on top of their compensated work rather than as part of it. If they serve on their own initiative, they can write off contributed expenses to participate.
- Most likely, the business member serves on their own time and at their own expense. Further, if meetings occur during prime periods of productivity, there is a measurable loss of potential income that the board member sets aside to serve. Even further, the business member worth their salt can tell you what that lost opportunity is.
In this illustration, the participation cost ranges from nothing to something substantial. Executive Directors and Board Chairs who are aware of this should be encouraged to structure their meetings for maximum impact and fulfillment of the mission. Poor board meetings and mission momentum aggravate those mindful of the sacrifice to their business and family to be present. Further, their confidence is eroded in the competence of their fellow board members and the organization's executives to lead in fiscal matters when they cannot understand the cost of participating.
Tags:process consulting, board governance, board meeting, board compensation, board development, board policy, board of directors, Mark L. Vincent, Design Group International, board engagement, Maestro-level Leaders, The Third Turn, The Third Turn Podcast, Stable Boards, Kristin Evenson, Third Turn Blog, Linda Milwanowski-Westdorp
November 24, 2022