Deciding whether to compensate or reimburse family foundation board members can be a difficult and complex decision. Boards and foundation observers have long debated the reasons for and against compensation and reimbursement.This Passages essay discusses the difference between compensation and reimbursement, provides guidance on how to initiate a conversation among your board members about whether or not compensation is appropriate, and offers suggestions for how to develop a written policy based on this conversation.While these suggestions are aimed primarily at the boards of private and family foundations, they may be appropriate to other types of grantmakers, including supporting organizations and, in some cases, donor-advised funds.

Family foundation trustees are classified as disqualified persons, and as such are subject to special rules regulating self-dealing and “conflict of interest” in private foundations. For purposes of this essay, we refer to the governing boards of foundations as “trustees.” Please note, however, that there are different legal responsibilities imposed upon governing boards depending on whether they are formed as a corporation or a charitable trust.

The law’s basic intent is to keep family foundation donors and boards from compensating family members and other disqualified persons at levels that are higher than appropriate for the services they provide. The law does not specify what “reasonable and necessary” services and compensation may be, but there are a number of considerations and sources to refer to when thinking about these issues.

Read the full article about board compensation by Jason C. Born.