Determining Reasonable Compensation for Foundation Directors and Trustees

The Council receives numerous inquiries each year about the amount of compensation paid to directors or trustees (members of the governing board) of foundations. Since 1969, board members of private foundations have been subject to excise tax penalties for receiving unreasonable compensation. In 1996, Congress passed the “intermediate sanction” rules that enable the Internal Revenue Service to apply similar penalties for excessive compensation paid by public charities. In light of these legal developments and more recent public concerns about trustee compensation, the Board of Directors of the Council on Foundations has revised these guidelines to assist foundations in determining appropriate levels of compensation. The Board of Directors of the Council is firmly opposed to excessive or unreasonable compensation. Even the public perception of excessive compensation can be damaging to the whole field of philanthropy. In these guidelines, the Council is not addressing the practice of reimbursing directors or trustees for reasonable out-of-pocket expenses; nor are we addressing the payment of compensation to commercial entities that may serve as trustees (such as banks, law firms or trust companies). Nevertheless, these payments should be reviewed with care as well.

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