Board Compensation

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

Board Compensation: Reasonable and Necessary?

Passages Issue Briefs

Deciding whether to compensate or reimburse family foundation board members can be a difficult and complex decision. This Passages Issue Brief 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…

Trustee Compensation: What Is Appropriate?

Report

If a foundation chooses to compensate board members, how does it decide on an appropriate level of compensation?

May 25, 2005

Board Compensation: Reasonable and Necessary?

Deciding whether to compensate family foundation board members can be a difficult and complex decision. This presentation reviewed some of the arguments both for and against trustee compensation, provided suggestions for how to initiate a conversation among your board members about whether or not compensation is appropriate, and provided suggestions…

Child care and more

Article

Q: Our foundation’s third generation is coming on the board and some have young children. Some family members say the lack of child care during board meetings hinders participation. Can the foundation pay for child care so that parents can attend board meetings?

May Our Board Pay a Disqualified Person for Services Such as Portfolio Management?

Ask the Center

May our board pay someone for portfolio management if they are an employee of a company owned or led by a board member and direct descendant of the foundation’s father? Yes, even if the individual being employed to do that work is a disqualified person, paying someone reasonable and necessary…

Sample Policies and Practices

Governance and compensation committee charter (The Wallace Foundation)

Sample

The Governance and Compensation Committee of the Foundation’s Board of Directors (the Committee) assists the Board in fulfilling its responsibilities in governance and the oversight of total compensation practices. The Committee’s purpose is to oversee the governance processes of the Board of Directors; identify and recommend candidates for election to…

Reimbursement policy for attendance at conferences by trustees and members (Nord Family Foundation)

Sample

This policy from the Ohio-based Nord Family Foundation provides a detailed description of when and why the foundation will reimburse trustees for expenses incurred while attending philanthropic and grantmaking conferences.

Policy Central: Board Meetings, Board Job Descriptions, and Rotation Policies

Sample

Boards that anticipate and plan for potential bumps in the road are far more likely to avoid difficult situations than those who create policies while in the middle of crisis. Included here are conflict of interest policies, board position descriptions, election and rotation policies, and much more. Please read our…