All non-profit boards have a fiduciary responsibility to approve “reasonable and not excessive” compensation plans and are able to be held personally liable for excessive compensation. As a board member, you can take an active role in keeping this on track and avoid issues with the IRS or bad media exposure.
Over the years, the shape of executive compensation has shifted. The subject itself often provokes strong emotion, therefore it is important to gain public trust and be aware of the regulations that govern this kind of compensation. In years past, the majority of nonprofits did not have incentive plans, but instead used discretionary bonuses as the approach to pay adjustments. Those days are all but gone in the wake of increased scrutiny. Even if your nonprofit chooses to use discretionary payments, these are 10 key tips to ensure that nonprofit boards can defend their approach should any questions arise:
It is necessary to provoke reasonableness in order to protect the status of a non-profit board and its members. As part of these steps to a more defensible compensation strategy, gain an outside perspective and ask for advice from an expert. With deep compensation expertise at all levels in both private, public, and non-profit sectors, The Overture Group’s Compensation Team is ready to help. Visit our blog or contact us today.