As a member of the Board of Directors, I have been told that the salary of our Executive Director is protected information not available to me or the public. Is this correct?
How do you scream in print? $#@^$%@!
A director of a nonprofit corporation has an absolute right under state law to review the books and records of the corporation in order to fulfill his or her fiduciary duty to the organization and knowing the salary of the E.D. is important for that purpose. Be very suspicious of anyone who tells you otherwise.
If your organization files a Form 990 tax information return the compensation has to be disclosed so that everyone in the world will be able to see it.
The E.D. will also want to be sure that at least some members of the Board know the salary and determine that it is appropriate in order to obtain a presumption of reasonableness for excess benefit tax purposes. The E.D. may have to pay an excess benefit tax if it is excessive. (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions.”)
Whoever said you could not find out the E.D.’s salary is just wrong.
Saturday, May 23, 2009
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I experienced this exact situation about 10 years ago, and it turned out that the CEO had been raising his salary about 27% over three years. He angrily had told the Board that his salary was none of their business and always redacted that information from financial reports given to the Board. When my husband and I dared to speak up and object and call for investigation, we were threatened by the nonprofit's lawyer and told we didn't know what we were talking about. However, the CEO ended up taking an earlier-than-scheduled retirement to "spend more time with his grandchildren." SO please dig deeper - this is important!
Nancy,
If no one has said kudos to you for speaking up, I will now. You did the right thing. I know that the organization you were a trustee for is better off that you did! After all, is that what a board is dutied with?
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