As a member of the Board of Directors, I have been told that the salary of our Executive Director is protected information not available to me or the public. Is this correct?
How do you scream in print? $#@^$%@!
A director of a nonprofit corporation has an absolute right under state law to review the books and records of the corporation in order to fulfill his or her fiduciary duty to the organization and knowing the salary of the E.D. is important for that purpose. Be very suspicious of anyone who tells you otherwise.
If your organization files a Form 990 tax information return the compensation has to be disclosed so that everyone in the world will be able to see it.
The E.D. will also want to be sure that at least some members of the Board know the salary and determine that it is appropriate in order to obtain a presumption of reasonableness for excess benefit tax purposes. The E.D. may have to pay an excess benefit tax if it is excessive. (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions.”)
Whoever said you could not find out the E.D.’s salary is just wrong.
Saturday, May 23, 2009