Generally speaking, board members should not be compensated for their service as board members. In fact, the voluntary nature of nonprofit boards is one of the important elements of the nonprofit sector in the United States. Less than 1 % of nonprofit organizations across the nation provide compensation to board members for their service as board members.
The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector® states, "Board members should serve without compensation for their service as board members." Some nonprofits provide reimbursement to board members for their travel expenses or other direct costs of serving in this volunteer capacity. This is legal and entirely appropriate for many organizations. For example, a nonprofit that is national or international in scope may have board members who reside all over the country or world. For these members to gather for board meetings or other events, nonprofits may provide reimbursement for travel expenses.
It may also be important to mention that board members are sometimes compensated for activities or tasks outside their role as board members. For instance, a teacher on your board may be hired to teach a course for the nonprofit organization. Or, a lawyer on your board may be hired to develop a contract for the nonprofit organization. Since teaching classes or drafting contracts is not part of the individual's governing role as a board member, it may be appropriate to compensate this individual for his/her work. Remember that any transactions between board members and the nonprofit must be properly reported on the organization's annual Internal Revenue Service Tax Form, Form 990.
In addition, it is advised that nonprofits have a conflict of interest policy in place to guide and direct situations where a board member, staff member, or volunteer may enter into a transaction with the nonprofit. The conflict of interest policy should address the types of conduct that may be considered a conflict of interest, should include annual disclosure of interests, and should provide review of transactions by uninvolved board members.
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From the Standards for Excellence®: An Ethics and Accountability Code for the Nonprofit Sector. The Standards for Excellence code, developed by the Standards for Excellence Institute, includes specific benchmarks and measures that provide a structured approach to building capacity, accountability, and sustainability in your nonprofit organization. The code identifies 6 major areas of nonprofit governance and management: Mission, Strategy, and Evaluation; Leadership: Board, Staff, and Volunteers; Legal Compliance and Ethics; Finance and Operations; Resource Development and Fundraising; and Public Awareness, Engagement and Advocacy.
The Standards for Excellence® Institute, a program of Maryland Nonprofits, provides the best possible resources to nonprofits nationwide, helping build their capacity to effectively and efficiently meet the needs of their communities. Members of the Standards for Excellence Institute gain access to an online community with an expansive library of resources and customizable templates. The Institute also offers nonprofit accreditation and recognition, a national network of consultants licensed to provide training on the Code, and professional volunteer opportunities.