When an organization is in its early stages, financial resources are often limited. It is not uncommon for board members to volunteer their time to support its development. They believe in its mission, want to contribute to its success, and understand its budget constraints.

However, compensation practices vary depending on the type of organization, whether it is a small or medium-sized enterprise (SME), a large corporation, a nonprofit organization, or a Crown corporation.

So, when does it become appropriate to start compensating board members?

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Compensation as the Organization Evolves

As an organization develops, both its activities and financial resources evolve.

This evolution may lead it to review its governance practices, particularly regarding compensation. However, the decision also depends on the type of organization, its mission, and its financial resources.

When the organization's financial situation allows and its circumstances justify it, compensation can become a way to recognize the contributions, expertise, and responsibilities of board members.

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When Board Service Remains Voluntary

There are, however, exceptions, particularly incertain nonprofit organizations whose bylaws explicitly state that board members are not compensated for their roles.

In other cases, it is the commitment to a cause that encourages individuals to serve on a voluntary basis.

As a result, even when these organizations' financial resources increase, board members may continue to serve voluntarily, and compensation practices remain unchanged.

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For Businesses : The Advisory Board

For some growing businesses, an advisory board can be a first step toward surrounding themselves with experienced individuals and benefiting from external advice and perspectives before considering the establishment of a more structured board of directors.

Unlike a board of directors, an advisory board does not have decision-making authority. Its members support business owners in their strategic thinking and help them make informed decisions.

Just like board members, advisory board members may initially agree to contribute on a voluntary basis. However, when the company's financial situation allows, it becomes appropriate to consider compensating them in recognition of their contributions and expertise.

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Can Compensation Help Attract Board Members?

Finding board members who possess the desired skills, understand the organization's challenges, and are willing to commit their time and energy can be a challenge for both businesses and nonprofit organizations.

Although compensation should never be the sole motivation for serving on a board, it can help attract new candidates and facilitate the recruitment of individuals with relevant expertise.

However, it is important to remember that compensation does not guarantee a board member's commitment or the quality of their work. Fiduciary responsibilities remain the same, whether a board member is compensated or not. Motivation, availability, and genuine interest in the organization's mission remain essential.

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How Do You Know When the Time Is Right?

There is no specific point at which an organization should begin compensating its board members. Before making a decision, a few questions are worth considering:

• Does the organization have the financial capacity to compensate its board members over the long term?
• Is compensation a common practice among comparable organizations?
• Is compensation consistent with the nature and mission of the organization?

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When financial resources allow and the organization's circumstances are appropriate, why not consider compensating board members? It is a tangible way to recognize the importance of their contributions.

After all, governance needs evolve alongside organizations. The ways in which board members' commitment is recognized can evolve as well, while remaining aligned with each organization's mission and unique characteristics.