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Boards that don’t pay attention to executive evaluation and compensation are opening the organization up to serious risk. One doesn’t have to look far to find evidence of public officials or the media questioning the appropriateness of a nonprofit executive’s compensation. Boards that don’t manage their review processes well are exposed.
To ensure that boards are setting clear expectations for executive performance and doing their due diligence on executive compensation, BoardSource recommends the following:
- A formal, written review of performance each and every year.
- An annual goal-setting process.
- Regular review of compensation.
- Use of external salary benchmarks.
- Full board approval of the compensation package.