State Senate Approves Nonprofit Board Pay Ban

The Massachusetts state Senate approved a bill on Friday that would ban public charities from paying their boards of directors.

The bill, which is attached as a budget amendment, would forbid boards of directors from earning hefty salaries, all while attending only a few meetings a year, according to a report in The Boston Herald. State Senator Mark Montigny (D-New Bedford), who created the amendment, said that the new law would only impact charities that are paid for by taxpayers.

The bill must now be passed by the House and signed by Governor Deval Patrick.

State Attorney General Martha Coakley had previously made it clear that she wanted this practice illegal. In March 2011, she blasted nonprofit board pay after a report in The Herald showed that Blue Cross Blue Shield of Massachusetts paid its boards of directors $90,000. The organization has since suspended that compensation. Coakley praised Montigny's bill in a statement and reiterated her objection to the practice of paying board members.

"Voluntary service by board members is the practice at the overwhelming majority of public charities, and for good reason," she said. "Compensation of board members raises concerns about maintaining board independence and ensuring the proper use of charitable funds."

You can read the full story in The Boston Herald.

Two More MA Nonprofit Health Insurers Rethink Their Board Pay

Excessive Executive Compensation has been an issue for the public ever since the bank bailouts.  It's all too common to hear about big Wall Street firms, that have received government bailout funds paying their executives an absurd amount of money.  However, now it's nonprofits that have the excessive compensation spotlght on them.

After Blue Cross Blue Shield of Massachusetts suspended the pay of their board members after intense public criticism (as well as an outcry over the $11 million severence package given to their ex-CEO), more nonprofits are reconsidering the way they handle executive and board pays.  According to the Boston Globe, two more nonprofit health insurers in Massachusetts are going to consider suspending their board pay after MA Attorney General Martha Coakley said other insurers should follow Blue Cross's lead.  The insurers, Harvard Pilgrim Heath Care and Tufts Health Plan, announced ther plans on Thursday.

Paying nonprofit board members, while not illegal, is considered extremely unethical.  In the Boston Globe article F. Warren McFarlan,a professor at Harvard Business School, harshly criticized this act:

“On for-profit boards, you expect to be paid. In the nonprofit world, it’s about time, talent, and treasure. It’s about serving the organization’s mission."

It is unclear at this point whether these two organizations, along with the rest of the nonprofits that pay their boards, will decide to actually suspend board pay and reduce excessive executive compensation.  One would think they almost have no choice if they want to avoid the wrath of an angry public.