Deciding whether to compensate or reimburse family foundation board members can be a difficult and complex decision. This Content Collection provides guidance on the legal regulations regarding compensation, suggestions for how to initiate a conversation among your board members about whether or not compensation is appropriate, and suggestions for how to develop a written policy based on this conversation.
Note: In lieu of compensating board members, many family foundations offer discretionary grants for their board members as a way to honor their volunteer time and effort on behalf of the foundation.
Start Here: Guidance from the IRS
The IRS offers the following overview advice with regard to paying compensation or reimbursing expenses for disqualified persons:
Paying compensation or reimbursing expenses by a private foundation to a disqualified person is generally an act of self-dealing. The general rule does not apply, however, to the extent the payments, which cannot be excessive, are for personal services that are reasonable and necessary to carry out the foundation’s exempt purposes. Thus, it is not an act of self-dealing for a private foundation to pay reasonable compensation to a foundation manager, who is an investment advisor, for managing the private foundation’s investment portfolio. Also, paying reasonable compensation to trustees of a trust would not constitute self-dealing, because their services are necessary. See Exceptions to Self-Dealing.
Discussion Papers, Webinars, and Other Resources
Trustee Compensation: What Is Appropriate?Report
Board Compensation: Reasonable and Necessary?
Child care and moreArticle
May Our Board Pay a Disqualified Person for Services Such as Portfolio Management?Ask the Center
Sample Policies and Practices
Governance and compensation committee charter (The Wallace Foundation)Sample
Reimbursement policy for attendance at conferences by trustees and members (Nord Family Foundation)Sample
Policy Central: Board Meetings, Board Job Descriptions, and Rotation PoliciesSample
Additional Perspectives and Examples of Excessive Compensation
Trustee compensation: Should your foundation pay?
They Get Paid? Foundation Board Fees Send the Wrong Message
Private Foundations and Compensation: Family Ties Can Lead to Problems
Leaffer Law Group
Can Board Members Be Paid?
National Council of Nonprofits
When Salaries Are Bigger Than Grants
The Chronicle of Philanthropy
Some Officers of Charities Steer Assets to Selves
The Boston Globe
Almost Crimes: The Boston Globe’s Foundation Exposés Revisited