The For-Profit Model of Paid Boards

A recent headline caught my eye:  “Should Board Members of Large Nonprofits be Paid?”  “NO!” my brain screamed.

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Why not?  Many love to tell me that the reason nonprofit board members don’t do their jobs, or do them well, is because they aren’t paid.  Such a statement is based on the belief—sadly, one widely held in this country, at least—that the only thing that motivates people is financial compensation.  Forget the intangibles of feeling good about helping to make a difference, giving back, being a force for good and/or change, etc. (which are, apparently, all lacking in for-profit board service).  According to the Corporation for National & Community Service, 62.8 million Americans volunteered last year, giving 7.9 billion hours of work.  Not all of those billions of hours could have been lousy, could they?

And if volunteers are such poor workers, why do so many nonprofits hunger for them?  It isn’t because nonprofits don’t care about quality; they do.  And they value the contributions volunteers make in helping them deliver quality service to their clients.  How can we value and appreciate volunteers in one portion of our workforce but not in another?   Each part of the workforce is equally central to the current and future success of the organization.  Pay one, pay them all.  But that isn’t the serious part of my argument.  I point that out simply because there are some areas of life where consistency is, indeed, not foolish at all, as Emerson would agree.

As for my serious argument?  Just because corporations pay the members of their boards of directors doesn’t mean a) nonprofits should and b) that they do a better job of guiding an organization than volunteer board members do.  At the end of the first quarter of last year, Reuters reported that publicly traded companies had experienced the highest number of bankruptcies in the first quarter of a year than in the last five years.  From this we can conclude that even organizations with paid board members end up being unsustainable.  Guess paying the board members didn’t get the best work out those people, huh?  And while the for-profit sector does seem to be seeing a bit of a decrease in recorded ethics violations (and the nonprofit sector a tick up, though not yet at the same level as for-profits), it appears it has nothing to do with the board and everything to do with integrated programs on ethics education and making the assessment of ethical behavior part of annual performance review.  So, where is the demonstrated value of paying board members?

It is about time that we pulled the plug on the campaign that for-profits do it better.  They don’t.  (Not that this is a competition; but the sooner we understand that for-profits don’t do it better, and automatically so because they are for-profits, we might actually start getting stronger, better organizations, regardless of what their raison d’étre is.

For years, I bought the myth that for-profits were faster at making decisions, and then the wool was removed from my eyes.  No, I actually started working with more and more for-profit corporations and saw the reality.  They move just as slowly as we do!  I’ve come to learn that, unfortunately, for-profits tolerate toxic employees just as long (which means far longer than they should) as nonprofits, though for-profits are better adept at dealing more quickly (though that term is relative) with underperforming employees than are nonprofits.

While neither for-profit nor nonprofit boards are going to win the award when it comes to diversity (though nonprofit boards have an edge), clearly paying for board services hasn’t helped the for-profits.  Over the decades, I’ve seen the best and the brightest on nonprofit boards, and nothing will convince me that paying is going to bring any better, brighter, more committed people to nonprofit board service, while I’ve met any number of folks getting paid quite handsomely to serve on for-profit boards that I wouldn’t ask for directions.

Let’s look at how the model gets implemented.  If you’ve ever seen a nonprofit board that works well—and, I’ll grant you that they are not a dime a dozen, but they do exist—you know that it is a model that shouldn’t be scrapped simply because it isn’t how for-profits do it.  The flaw in nonprofit governance isn’t in the lack of payments to board members but in the lack of attention and effort put into a) selecting the members, b) educating—from the start of the recruitment process through to the very last day of service—the members and c) truly holding all members accountable.

Yes, this is endless work and incredibly time consuming, but the return on investment beats all that you would pay to get far less out of board members.  Rather than take the easy road and follow the tawdry example of greasing palms to buy what (we think) we want, let’s remember all those intrinsic reasons why people, whether paid or not, want to be paid or not to be part of a nonprofit—and play to that strength.