Bill to limit nonprofit board compensation

Following public pressure, the Massachusetts Senate passed legislation that limits compensation for board members of nonprofit institutions, reports the Epoch Times.

With nationwide initiatives to cut health costs, Massachusetts's Office of the Attorney General in April finalized an investigation of four major health insurers--Blue Cross Blue Shield, Fallon Community Health Plan, Harvard Pilgrim Health Care and Tufts Health Plan. The Attorney General found that they offered generous compensation to their directors, yet they claimed a nonprofit status.

Massachusetts has more than 22,000 nonprofits in the state, most of which do not compensate their board members, according to the Epoch Times. At least eight of the 50 largest nonprofits in Massachusetts offer compensation to the directors, reports the Boston Globe.

In response, the organizations said the compensation was based on complex duties, time commitment, and required skills of the directors, a claim rejected by the Attorney General.

"There is no justification for board members to be compensated at the Commonwealth's four major not-for-profit health insurers," said Attorney General Martha Coakley in an April statement.

Since then, the Massachusetts AG has called for transparency of compensation, that is, annual public reporting with clear explanations of payment.

According to "The Attorney General's Guide for Board Members of Charitable Organizations," which provides recommendations for conduct, the nonprofits should beware of conflicts of interests, particularly related to financial matters:

Any conflict transaction should be scrutinized very closely by the board, both because of the dynamic it creates within the board and because of the predictable skepticism with which the public and regulators will view the transaction, no matter how scrupulously a careful policy is followed...

... As a board member you have primary responsibility for making sure that the charity is financially accountable, that it is not allowing charitable assets to be used inappropriately or diverted to private interests, that it has mechanisms in place to keep it fiscally sound, and that it is properly using any restricted funds it may have."

Sponsor of the bill Sen. Mark Montigny said, "The public is rightfully outraged that some of these organizations have given excessive compensation packages to top executives, and even board members, who are supposed to be volunteers, instead of using money to fulfill their missions and help those most in need. The time has come to put an end to these abuses," in a statement.

For more:
- check out the press release
- here's the Epoch Times article
- here's the Boston Globe article
- read the guide for board members (.pdf)

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