Is a board member entitled to remuneration? If so, how much should a board member earn? Who determines the amount of the remuneration? The board itself? Isn’t that strange? Is a board member entitled to compensation of expenses, such as telephone costs? Is he entitled to an attendance fee?
Such questions are relevant for the many small and larger foundations and associations in our country. These organizations are active in a great variety of fields. Think of sports, public housing, domino and chess, schools, labor unions, hospitals, care for the elderly, etc. Traditionally, a foundation has a so-called idealistic purpose. That sounds nice. Some foundations indeed have a nice purpose. However, larger foundations can often be considered “ordinary” companies. Think of the hospital, the FKP, the SOAB. I want to discuss the smaller foundations here and the remuneration of board members in these smaller foundations.
Management is a responsible duty. The board members of the foundation are the “boss” in the foundation from a legal perspective. They represent the foundation in internal relations and to the outside world, meaning towards the community. Lawyers then say “in society”. The board has to make sure that sufficient money comes in. It also has to see to it that the money is spent in conformity with the purpose of the foundation. So the board of a sports foundation cannot spend money on nursing care of third parties. The board of a nursing care facility cannot spend money to subsidize sports. The board is in particular responsible for the continuity of the foundation. And on top of it there are all the liability risks nowadays. All this is relevant in every foundation, large or small. What is it worth?
Well, all this responsibility in the board of a foundation or association is unfortunately not worth much in general. If you consider money, that is. You are not “entitled” to remuneration. That is exactly the point with a foundation. The idea is that you become a member of the board of a foundation or association because you want to commit to the good cause. Your inspiration is not based on monetary remuneration but on the feeling to commit to something nice. That can mean that the accountant who normally earns ANG 600 per hour and is also the treasurer of the football club spends many hours on the financial statements of the club and gets nothing in return. Yes, a good feeling and the possibility for his children to play football.
Yet, many board members feel they should have some right to remuneration, if only an expense allowance. How does that work? Basically, there is not any objection to granting vacation pay and/or an expense allowance. It is possible and allowed. In that connection, it is also called vacation pay or attendance fee. This is a (limited) remuneration for attending meetings. This also raises questions. First the question about the fiscal consequences, and in addition the amount of the expense allowance. Thirdly, who determines this remuneration. The question whether you can also be paid extra for extra services as a board member is also interesting, and finally the question whether someone can be employee and board member of a foundation at the same time. The next column is about those five questions.
This column is also available in Papiamentu. Click here to download a pdf version.
Do you have a question about corporate governance yourself? Please e-mail it to firstname.lastname@example.org and perhaps your question will be discussed in the next blogpost.