Should Board Members Be Paid? A Personal Experience
August 30, 2010 — I never thought much about it, but some board members think they should get paid for what they do. My small, 22-unit Manhattan co-op, like others of its type, flirted with this idea some years ago when a board member took over as the manager. Our smallish management company had been falling down on the job, and one director — who worked at home anyway — found himself taking on more and more of the manager's duties: dealing with contractors, keeping watch on the building systems, responding to shareholders' requests, even going to the Department of Buildings to appeal rulings. When we had finally had as much as we could take from our manager (at one meeting, I asked why some longstanding task had not been completed, and her response was: "Well, you can pick up the phone and make a call to the contractor, too, you know"), we decided to hire our director as manager. We had to pay him, of course, but we were traditional enough to have him step down from the board.
And that brings us to the question of the hour. Why are professionals and most board members so dead set against the notion of paying for board service? To hear them talk, you'd think the discussion was about bribery and corruption, not compensation for time spent. "I don't think it's appropriate. Most bylaws prohibit it," says Arthur Weinstein, a veteran co-op and condo attorney.
"It might create the wrong incentive for a person to serve on the board. They'd be serving for the money rather than for the good of the building. And I don't think you could ever compensate people fairly for the amount of time they put in. It would be inadequate."
"It doesn't seem that ethical from the outside," notes CPA Jay Menachem. "The board isn't supposed to make money off the building operation — to take compensation for what is supposed to be a voluntary job."
Would you rather invest your life savings in a corporation with a "professional" board that is trained in the matters with which the corporation must deal, or would you prefer to put your money down on the corporation with the "amateur" board that was learning as it went along?
Should you try compensating your board members? What are the pros and cons of paying board members for their services? What might be the consequences? Have you done it?
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