I generally agree with this given the present time commitment, but note one concern. If someone is getting paid for 8 hours a week (0.2 FTE), plus is devoting additional paid time during fire drills, they may be starting to be more financially enmeshed with the organization for which they serve as a director. That level of financial involvement is starting to look more like that of a part-time employee rather than that of a typical paid director.
Of course, it’s common for some directors to have significant financial enmeshment with their organizations. But there are good reasons you want a majority of directors to not have significant enmeshment—i.e., to have financial independence from their organization. This wisdom is reflected in, e.g., California Corporation Code 5227, which requires that a majority of directors not be “interested persons” such as employees or contractors.[1]
The upshot of that is that the solid proposal of paying directors under these circumstances needs to go hand-in-hand with plans to reduce the time commitment for (at least most) directors significantly over time.
“[R]easonable compensation paid to a director as director” doesn’t make one an interested person. I don’t know at what point the director starts looking too much like a part-time employee . . . but my point is about the wisdom of not having too many directors with significant enmeshment, not whether an arrangement would comply with any given law.
What do you think about the idea of large donors holding back some of their funding and directly transferring it to the people in the board? Or the donors could maybe earmark some part of their funding for that purpose. Then the people in the board don’t have to feel like their income is dependent on their relationships to people in the org.
I think the issue is more that such an income would depend on the org’s performance or existence even in that arrangement, and that directors should be ready to make hard decisions that could e.g., shut down the organization. Depending on the org in any way would limit their decision power to make such calls.
I generally agree with this given the present time commitment, but note one concern. If someone is getting paid for 8 hours a week (0.2 FTE), plus is devoting additional paid time during fire drills, they may be starting to be more financially enmeshed with the organization for which they serve as a director. That level of financial involvement is starting to look more like that of a part-time employee rather than that of a typical paid director.
Of course, it’s common for some directors to have significant financial enmeshment with their organizations. But there are good reasons you want a majority of directors to not have significant enmeshment—i.e., to have financial independence from their organization. This wisdom is reflected in, e.g., California Corporation Code 5227, which requires that a majority of directors not be “interested persons” such as employees or contractors.[1]
The upshot of that is that the solid proposal of paying directors under these circumstances needs to go hand-in-hand with plans to reduce the time commitment for (at least most) directors significantly over time.
“[R]easonable compensation paid to a director as director” doesn’t make one an interested person. I don’t know at what point the director starts looking too much like a part-time employee . . . but my point is about the wisdom of not having too many directors with significant enmeshment, not whether an arrangement would comply with any given law.
What do you think about the idea of large donors holding back some of their funding and directly transferring it to the people in the board? Or the donors could maybe earmark some part of their funding for that purpose. Then the people in the board don’t have to feel like their income is dependent on their relationships to people in the org.
I think the issue is more that such an income would depend on the org’s performance or existence even in that arrangement, and that directors should be ready to make hard decisions that could e.g., shut down the organization. Depending on the org in any way would limit their decision power to make such calls.