Local Nonprofit Boards Do Without Pay | Expertise doesn't always have to come with a salary
When Blue Cross Blue Shield of Massachusetts disclosed the multimillion-dollar severance package that former CEO Cleve L. Killingsworth got after resigning from the position, observers criticized not only the payment itself but also the fees paid to the board members that approved the package. After that, it didn’t take long for the board to suspend those payments, which ranged from $11,415 to $89,886 last year.
Worcester’s Fallon Community Health Plan also stopped paying its board members, whose 2010 compensation ranged from $13,900 to $24,350.
Paying members to sit on a nonprofit board is unusual. In 2008, a study by the Massachusetts Attorney General’s office found only four nonprofits that did it: Blue Cross, FCHP and the state’s two other nonprofit health insurers, Tufts and Harvard Pilgrim.
Yet it’s not hard to see the argument for paying directors. The most basic economic logic suggests that if you want to attract great talent and then make it perform well for you, you need to offer something in return. So how do nonprofits make do with unpaid boards?
Personal Connections
At one of Central Massachusetts’ largest nonprofits, the multifaceted service provider the Seven Hills Foundation, spokesman Bill Stock says it’s easy to find capable board members because they typically have relatives or loved ones who are among the groups Seven Hills serves.
“There’s a personal connection, and that’s usually a driving factor,” Stock said.
Paul Gavejian, managing director of Total Compensation Solutions in New York, which advises nonprofits and other organizations about their compensation strategies, said that’s typical for charitable, service-oriented nonprofits. Gavejian said his firm recently surveyed about 760 nonprofits and found that less than 10 percent compensate their boards. Those that do are mostly in less warm-and-fuzzy fields like health insurance and health care-related group purchasing.
For organizations that don’t naturally attract people with an affinity for their work, Gavejian said it may make sense to pay. “If you want to put a physician on your board of directors or a lawyer or someone else in professional services, those folks could be doing something else,” he said. “There’s some opportunity cost for those people and — face it — you do want to find those people of a professional caliber.”
Gavejian said that for some nonprofits, as for most for-profit companies, the cost of paying board members is negligible compared to the importance of having qualified people guiding the enterprise.
“What if the board doesn’t set the correct policy?” he said. “There’s a value proposition here in that you’re getting highly qualified people who can make the correct decisions for the organization.”
In the Central Massachusetts nonprofit world, the UMass Memorial Health Care system, with annual revenues of nearly $2 billion, is an enormous and very complex organization. Like most hospital systems, it doesn’t pay its board of trustees.
Doug Brown, senior vice president and legal counsel, said UMass Memorial is highly dependent on having a board with a broad range of skills. The organization seeks out people with particular types of experience, as well as people with “behavioral competencies” like strategic thinking and the ability to challenge the status quo, he said. And it finds them because so many people in the area are committed to supporting the organization.
Bigger Responsibilities
Brown said the greatest difficulty in attracting board members in recent years has come from repercussions of the 2002 Sarbanes-Oxley Act, which put far greater responsibilities on corporate boards.
Those additional responsibilities have been trickling down to nonprofits too, something Gavejian said has encouraged some organizations to start paying board members.
But Brown said the idea of paying hasn’t been on the table at UMass Memorial.
“It may very well be that if we paid folks we might have a much broader pool to pull from,” Brown said. “But I don’t know. We’ve really been very, very fortunate in getting some great trustees for our organization.”
There are reasons to be part of a board that go beyond money or charitable feelings. Some board members gain knowledge and connections that help them in their day jobs. Dix F. David, a retired vice president of Allmerica Financial, says that being part of various Central Massachusetts organizations is its own reward.
“Once I retired, then what do you do with your life?” Davis said. “The people you meet on these boards, the things that we work on, are so interesting to me that I don’t need any reward beyond the stimulation and companionship and interesting projects.”
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