Should Board Members Be Paid?
ASSOCIATIONS NOW, January/February 2014, Feature
By: Mark Athitakis
|Summary: Wait, you mean some people get paid for this? It's not a broadly adopted practice, but some associations see smart board-member compensation as a way to enhance diversity and skill among its leadership. Here's how they're making it work.||
The association world has its share of bedrock principles, and one of the most enduring is that board leaders are supposed to give freely of their time. If you need a reminder of this, just flip to the front cover of this magazine: We work in a community that presumes that board leadership is a volunteer activity, with at best reimbursement for travel costs. According to this long tradition, the true compensation for sitting on a board is the pride you feel in supporting the industry your association serves.
But does it have to be that way? Some associations do pay their board members, after all, and find it an effective way to diversify the leadership pool and bolster commitment to the organization. "I think it sets the bar a little higher," says Dr. Kory Ward-Cook, CAE, CEO of the National Certification Commission for Acupuncture and Oriental Medicine (NCCAOM). "It says that we value their service and that we expect them to fully participate in their duties."
Of course, shifting to a board-compensation policy shouldn't be taken lightly: It can affect the culture of the board, alter members' perception of the association, and have legal and tax implications. But in a post-recession economy in which the nature of volunteering has changed, paying board members for their service may no longer be an idea to reject out of hand.
Time Is Money
Paying board members for being board members is rare: According to 2011 ASAE benchmarking research, only 13 percent of associations have some kind of compensation arrangement with the chief elected officer, such as an annual stipend or per-meeting fee; compensation for other board positions is even less common. Medical societies are often considered the most common sector for such policies, but less than a third (31 percent) have them, according to a recent survey by the American Association of Medical Society Executives.
Leigh Wintz, PRP, FASAE, CAE, principal consultant for Tecker International, is seeing the subject emerge more often, though. Anecdotally, she says, "some form of compensation for lost time off from work has ticked up a bit. It's been harder to get volunteers to step up to what's generally a heavy-duty role with a lot of travel that requires time away from businesses."
How Much to Pay?
A September 2013 survey by the American Association of Medical Society Executives revealed a wide range of compensation for board members at medical associations. At the top end, a president can receive $125,000 annually for service, according to the study. But the averages suggest that, generally, pay is more modest:
That's long been the justification for board compensation at medical societies: The time demands on board members could effectively shutter a practice. The American Association of Endodontists, for instance, pays the top six of its 22 board members on a sliding scale, with the president paid the most. AAE Executive Director James M. Drinan says the policy has helped open the door for leaders who might not otherwise consider the role.
"For folks who, for whatever reason, are in a different economic situation—either because they're in the military or academia, or research and science, or a relatively new practitioner, or a part-time practitioner—it is an attempt to say, look, 'We're trying to not have it be only people in the senior part of their careers [who] have established themselves enough that they can afford to take this kind of time off,'" he says.
The pay needn't be sizable to make a difference. At NCCAOM, which has a budget of just over $3 million, board compensation has been well under five figures per board member. But that relatively small stipend can make a difference. "Sometimes it motivates them a little more," says Ward-Cook. "I'm certainly impressed with the level of preparation that our commissioners come to the board and committee meetings with."
Need for Transparency
Shifting board service from voluntary to compensated has consequences. Some are obvious, but some are less so.
Jefferson C. Glassie, an attorney with Whiteford, Taylor & Preston, LLP, notes that the IRS demands that board members only be paid "reasonable compensation" for their service. That sounds simple, but determining what "reasonable compensation" means requires a serious expenditure of time and energy.
Typically, a separate committee spends time researching compensation data and carefully documents its activities to show that committee members aren't feathering their own nests. The American Association of Endodontists, for instance, convenes a compensation committee every three years, comprising past presidents, AAE's treasurer, and members with no ties to the board. The group benchmarks against similar organizations and factors in the amount of time officers spend serving the association. "We try to have this be a somewhat objective, dispassionate group of people," Drinan says.
But it may not be enough just to ensure that your board isn't engaging in, as the IRS puts it, private inurement. "They need to look at appearances," says Wintz, and clearly deliver information to members about the thinking behind the policy. Moreover, shifting to a compensation policy can alter board dynamics in a variety of ways. Though Ward-Cook hasn't seen it at her organization, she says she's mindful that paying board members can potentially blur the line between volunteer and staff positions. Board members "need to clearly understand their role," she says. "They're not being compensated for tasks the staff normally does."
Drinan notes that while a compensation policy can broaden the pool of potential board members, the policy shouldn't lead to a board that doesn't accurately represent the industry. For example, compensation can bring in academics with lower incomes and more flexible schedules, he says, but "you could have disproportionately high participation that way. Are they able to appreciate the concerns of private practitioners?"
Good Business Sense
In March 2013, Paul Pomerantz, FASAE, CAE, became CEO of the American Society of Anesthesiologists. It was his first executive position at an association that compensated elected officers beyond the president. From his perspective, paying board members or not paying them doesn't alter their level of commitment to leading the organization. But he says he's come to think that compensation can mark an important shift in how an organization perceives itself.
"We talk in many ways that we want our associations to run more like businesses," he says. "But if you're serving on a corporate board, you're often being pulled in because of the expertise that you have, and your ability to provide the guidance that the company might not be able to otherwise acquire. For associations, that would be an interesting paradigm shift: What we want to get on this board is the best talent we can. We value the diverse perspectives and the diverse experiences of our board leadership, and we recognize that service as a board leader represents a significant investment of their time. We believe it is appropriate to compensate our board leadership for that investment."
As the scope of board duties expands to accommodate more pressing business needs, it may make sense for associations to provide more financial return for board service. At the American Association of Endodontists, for instance, many volunteer duties look a lot like what members would encounter serving on a corporate board.
"More and more we're asking our senior officers to go for two weeks to Asia, to spend five days in Europe at an international meeting, to meet with their counterparts who come to the United States and have high-level conversations," says Drinan. "That was not something that was a significant activity six or nine years ago."
For any organization facing similar changes, should the definition of what a board member is worth change too?
Mark Athitakis is a contributing editor to Associations Now. Email: email@example.com
- "When Perks Pay Off," by Mark Athitakis, www.associationsnow.com, July 1, 2013
- "Association Agenda: Tax-Exempt Groups Under Scrutiny," by Chris Vest, CAE, Associations Now, April/May 2013
- "Board Compensation Practices," Associations Now, November 2009
- "Should Board Members of Nonprofit Organizations Be Compensated?" Knowledge Center Staff, www.asaecenter.org, November 2006
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