Should NFP Directors Be Paid?
Friday, 3rd March 2017 at 2:07 pm
The contentious issue of not-for-profit board remuneration caused a heated debate at the Australian Governance Summit on Thursday.
The not-for-profit director session, called Profit is Not a Dirty Word, began with an opening address from the head of the Australian Charities and Not-for-profits Commission, Susan Pascoe AM.
While the focus of the panel was financial sustainability, it was a question from the audience that divided the panelists, philanthropists and international directors Allan Myers AC and Laura Anderson, and independent journalist Gideon Haigh.
“One of the big pieces of dialogue I’ve experienced in my role in a not for profit is: ‘Do we pay directors?’” the questioner said.
“You could be glib and say: ‘You pay for what you get sometimes,’ and… my feeling’s always been we shouldn’t be adverse to paying directors – prioritise that a bit more highly and not be as pious sometimes about why people come to the boards of not for profits.”
The latest Board Remuneration Report, released December last year, found almost 14 per cent of not-for-profit board members were currently receiving payment for their services – a drop from a 17 per cent high in 2012/13.
The authors of the report said respondents were passionate in their responses to the topic.
On the panel, Myers, who founded the Grattan Institute and chairs the National Gallery of Australia Council, led the debate, strongly opposing board remuneration.
“I’m on the other side of the debate, let me say that right at the beginning… Do you think you’re going to get better people by paying them, that’s the first question,” Myers said.
“What’s the evidence that you’ll get better people by paying them? There are plenty of people in our society who have the time and the energy and, if you like, the financial background, they’re in a comfortable financial position to serve on boards.
“At least you’re sure if someone comes onto a board, if he or she is not being paid, that they’re doing it for something other than the money.”
Myers, who was valued at $671 million in last year’s BRW Rich List, said “strong and vibrant” voluntary support of charitable causes was a hallmark of Australian society.
“It’s a sign of the health of any pluralist society that people are prepared to give in the interests of society without being paid,” he said.
“I think if you start paying people just because your organisation has money, you won’t improve the quality of those whom you get, you might even put off some who want to be volunteers, they want to do good without payment. I’m all against payment.”
However Haigh, prolific sports journalist and contributor to the debate on governance in sport, argued remuneration facilitated diversity on boards, which, he said, “people seem to regard… as a commendable outcome”.
“There are good people who cannot afford to be on boards, who cannot afford to dedicate their time,” Haigh said.
“There was recently a discussion that the AFL needed an Indigenous commission member, but really, there are very few Indigenous people who are capable of devoting the necessary amounts of time to be an AFL commission member without some sort of financial incentive.”
Anderson, director of the Fulbright Commission and Epworth HealthCare, and chair of The Good Foundation, said there were means outside remuneration to achieve board diversity.
“I do like diversity and I do want to bring others along, I actually architect the meeting time and agenda to suit people who have to work full-time, but they want to get that experience and engage,” Anderson said.
“I agree with what you were saying Allan, I don’t think you get better performance just by paying someone at all, I don’t think that works.
“I also think it’s important for inclusion to include the diversity of aspiring contributors who may not have the financial resources behind them to engage… again, it’s about the architecture of your board agenda.”
Myers then reiterated his argument that remuneration would not attract better directors.
“If you’re talking about people who are volunteering, they’re not going to be, mostly, young people who are making their way along in life, for example, who might have children and are trying to get established in an occupation, business or profession,” he said.
“A lot of this volunteering is for old girls and old blokes like me, who can do something useful which requires experience which has been reflected upon, which produces what is called wisdom.
“And I just don’t know that you’re going to get better people by paying them. I’m not against ensuring people who can’t afford to be out of pocket by being on a not for profit are not given passage money, or sitting fee or something like that, but not salaries for goodness sake.”
At this point the facilitator ended the debate, moving onto the next audience question.
Pro Bono News spoke to Haigh after the panel. He said paying directors could lead to better board performance.
“Some organisations now, in the not-for-profit space, are handling very, very large sums of money. Therefore they have higher and higher expectations of directors, and in order to get directors to pay the necessary amount of attention to their responsibilities, it seems to me common sense that in certain cases payment should be de rigueur,” he said.
“I think lack of payment tends to affect what organisations are prepared to ask of their directors, it might mean that you only ask your directors to come together six times a year, or you don’t really expect them to read board papers all that closely, and that, to me, is inherently sub-optimal.”
Haigh said directors should reflect the communities not for profits serve, which requires remuneration.
“If they really want to be representative of the wider public, then they have to be prepared to encourage interest from people who aren’t independently wealthy and don’t become eligible simply because they can afford to donate their time,” he said.
“I think as a general principle, you can just be too puritanical about these things.
“Your services are not simply going to be allocated to the independently wealthy, or the 50-plus or the white male. If you want to be genuinely representative, then you actually have to have a board that reflects that, and I fear sometimes with not for profits that they’re restricting their own gene pool of influences.”