Publications
Should Board Members Be Paid?
This is one of the most frequently asked questions in dealing with co-ops, condominiums and homeowners’ associations. When a property is new, the residents are full of energy and enthusiasm and there is usually no shortage of volunteers. Frequently, the first election is hotly contested with owners lining up to serve on the first board. However, as time goes on and the newness wears off, many associations have a hard time filling the available seats.
If directors were paid, could an association rejuvenate its board and owner enthusiasm for serving? I do not believe that would be the case.
First, there are some legal obstacles to overcome. Most by-laws provide that directors shall not be paid unless it is approved by a majority of owners.
Secondly, since the directors have a direct economic interest in the outcome of such a decision, the board members could be prohibited from voting on such a proposition (unless it were for a future board) due to conflict of interest.
Third, the Illinois General Not For Profit Corporation Act defers to the by-laws (even though it does say directors can vote on compensation for themselves).
Fourth, many insurance policies covering directors and officers liability may void coverage where directors are being compensated.
Fifth, directors are more likely to be confronted by owners who are unhappy with performance, and may demand resignations or removal if directors are paid.
As a practical matter, paying directors for serving on a community association board where they own property, and in most instances reside, raises the question of proper motivation.
Most people get involved in a board because they care about their investment and want to protect their property values. If people are becoming candidates because of what they can get out of it, or to supplement their income, how will that affect the outcome of the decision-making process? Will essential items be deleted from the budget so it does not impair the directors’ salaries?
How can a reasonable compensation be set? By the hour, per meeting, per month...? Will the directors call extra meetings or drag them out to increase their pay? How much pay is enough?
In most instances, people with a true spirit of "volunteerism" will rise to the occasion. Some may even choose to waive their compensation. However, owners should step forward and serve on the board just as all citizens should step up and volunteer for some type of public service. If each owner served for a year or a two-year term, there would never be a shortage of good director candidates.
One of the problems in filling boards with qualified candidates is "burn out." Instead of creating a "what’s in it for me" atmosphere by paying directors, limiting the number and length of meetings will go a long way towards keeping people involved. There is no law that says boards must meet every month, or that meetings must last for four hours. The reason the statutes and by-laws require four meetings per year, is that in most cases, that is all a board really needs to meet to successfully administer the property.
If a budget has been adopted, contacts signed and the property is professionally managed, quarterly meetings should be sufficient, but even 6 meetings is better than 12. If a meeting is run according to an agenda and basic rules of parliamentary procedure (instead of a coffee klatch), directors might choose to stick around a little longer and people may want to participate.
Some associations are self-managed or hire one of the directors to be the manager. Although the arguments for volunteerism are still the same, if someone earns their livelihood managing the property, this becomes a different problem. In those instances, a director must remember that they cannot vote on any issue where they have a direct economic interest. Condominiums must make a full disclosure to the membership, who have the right to veto such a relationship by holding a referendum.
In communities where there is a shortage of qualified candidates, there is a strong likelihood that people have had an unpleasant experience on a board and the word has spread. The residents must remember that it is intended to be a volunteer job, people are trying to help and the board consists of owners who pay assessments like everyone else. If board members are not being paid, they are far more sympathetic than directors who serve for economic gain.