To Pay or Not to Pay, That is the Question

The national Better Boards Conference held in Melbourne over the weekend saw more than 400 Not for Profit CEOs and Board members join together to learn more on how to govern in turbulent times.

The delegates were engaged in a debate on Saturday which looked at the contentious issue of whether Board members should receive remuneration.

The debate also polled delegates, which included both paid and unpaid Board members, to gain insight into their thoughts – with a neck-and-neck result of half believing Board members should be paid and half against the idea.

Debate speaker, Queensland’s Churches of Christ CEO Dean Phelan said the percentage of remunerated Boards was going up.

He said in 2011, 14% of Not for Profits remunerated Board members and in 2012/13 this rose to 17%.

Phelan said paying Board members could assist with the increasingly difficult task of recruiting Board members to Not for Profit organisations.

“It has historically been passionate people that are committed to the organisation and would be horrified to be paid…but those people have moved on and we need to have some sort of incentive to cover the costs of being involved,” he said.

Phelan said 48% of NFPs were currently experiencing difficulties recruiting Board members, according to a survey conducted by Better Boards which is soon to be released.

Phelan said Board members should be remunerated because the job of NFP Board directors was getting harder. He said NFP directorship was often more complex than For Profit directorship.

He said increasing litigation and legal liabilities also made it more necessary for Board members to be paid.

Phelan said there was an increasing complexity in governance which resulted in increasing requirements for a skills-based Board.

“As well as this, there was increasing complexity in NFP governance which meant there was increasing time demands and increased accountability,” he said.

Carne Reidy Herd Lawyers partner and second speaker for the debate, Brian Herd presented a theatrical response as to why Board members shouldn’t be paid, claiming the egg and lettuce sandwiches provided at meetings should be suffice.

He asked the delegates, ‘if your Board got abducted by aliens, would you pay to get them back?’

“If you’re not going to pay to get them back, would you pay to keep them?” he said.

“Pay might make them turn up but it won’t make them turn on. They will be present but they won’t perform.”

“Remuneration is never enough- it is in the sandwiches.”

Herd made delegates aware that by paying Board members, they then became personally liable and legally responsible.

“If you volunteer as a director, you are immune to being sued and other civil liberties,” he said.

Herd said if Board members were to be paid, they should also be subject to performance reviews, just like in the For Profit world.

But he said, for most Board members it was more valuable for organisations to simply recognise their contribution.

“It is more about recognition than rewards,” he said. “It doesn’t attract or entice people based on remuneration."

Third speaker, Christine Jones, CEO of disability training and employment organisation Steps Group Australia, said there was no blanket answer as to whether all Boards should or shouldn’t be paid.

“Some Boards, yes, a payment is important and essential…but others, it is just not practical or affordable,” she said.

Jones said sometimes it was difficult to justify paying Board members when often the organisation’s staff received lower than commercial wages.

But she said it was difficult to determine how someone was going to perform, irrelevant of how much you pay them.

“Often Not for Profit Board members, like NFP staff, will work below commercial rates or put in 210% that others wouldn’t do,” she said.

Jones also said paying Board members promoted a sense of professionalism and could potentially enhance more engagement by members.

Final speaker for the debate, Thomas Holt CEO Alexandra Zammit said Board remuneration went against the fabric of Australian life which was of helping out your mates and doing good in society.