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In its June 30, 2011, issue, The Chronicle of Philanthropy reports that Massachusetts may shortly enact a ban on compensation of the trustees of all nonprofits. The bill, an amendment to the state budget, has been sponsored by State Senator Mark C. Montigny and would prohibit public charities from compensating their directors in the absence of the approval of the Massachusetts Attorney General.
This initiative parallels a campaign by Massachusetts Attorney General Martha Coakley against nonprofit health insurers. In truth, the legislation may have its origins in a September 2, 2009, memo from David Spackman, Chief of the Non-Profit Organization/Public Charities Division of the Attorney General’s office to the Massachusetts Hospital Association and four nonprofit health care organizations. The document declared that the division was generally “increasing its oversight of executive and director/trustee compensation practices.” But its intent may have been more accurately signaled by characterization of independent director compensation as an “unusual practice” that is “extraordinarily rare in Massachusetts.” Such language leads one to reasonably conclude that AG approval of trustee compensation is not a likely prospect.
It strikes me that if the practice of trustee compensation is genuinely uncommon, it represents a minor matter and may actually represent a valid exception to the general case. This is suggested by the comments of one foundation CEO cited in the article to the effect that his organization may as a result suffer in its ability to attract qualified people to serve on his board. Indeed, Sen. Montigny’s amendment may have the unintended consequence of treating all nonprofits alike, to the detriment of those that have operations requiring sophisticated management and similarly astute, not to say experienced, boards.
Banning all trustee compensation to root out a few excesses reminds me of Gallagher smashing watermelons with a sledge hammer. Neither is particularly funny.
Paul Creasy
The original Chronicle article may be found here: http://philanthropy.com/article/Mass-May-Soon-Ban-Pay-for/128001/
A recent Boston Globe item here: http://www.boston.com/business/articles/2011/05/28/senate_oks_charity_directors_compensation_rule/
The September 2, 2009, Spackman memo here: http://www.mass.gov/Cago/docs/nonprofit/bcbs_memo_090209.pdf
Comments by the law firm of Ropes & Gray on the Spackman memo here: http://www.mass.gov/Cago/docs/nonprofit/bcbs_memo_090209.pdf