Should Coop/Condo Board Members be Paid?

“This is not acceptable,” Hankin, a partner at Hankin & Mazel, recalls saying to the president. “Serving on a board is a volunteer position, as in ‘no pay’ and ‘no thank-yous.’ Once you look to make a profit from this position, then you are looking for trouble. I think it’s a terrible idea, and it would only be acceptable if the shareholders voted to give a weekend retreat.”
Alan Bentz-Letts, the former board president at Parkway Village, would probably agree. After the board made one of its members the manager, Bentz-Letts wrote a letter to the directors protesting. The member intended to keep his board position and serve as a salaried agent for the property as well. Bentz-Letts labeled the employment a clear conflict of interest at the 109 low-rise brick buildings located on 37 acres in Kew Gardens Hills. His remarks, however, fell on deaf ears.

But was it as clear a conflict as all that or simply a recognition of realities? Many people don’t want to do something for nothing anymore. So why are professionals and most board members dead set against the notion of paying for board service?

“I don’t think it’s appropriate. Most bylaws prohibit it,” says Arthur Weinstein, a veteran co-op and condo attorney. “It might create the wrong incentive for a person to serve on the board. They’d be serving for the money rather than for the good of the building. And I don’t think you could ever compensate people fairly for the amount of time they put in. It would be inadequate.”

“It doesn’t seem ethical from the outside,” notes CPA Jay Menachem. “The board isn’t supposed to make money off the building operation — to take compensation for what is supposed to be a voluntary job.”

“If they are running for the board to make a financial windfall, then that’s the wrong motivation,” argues attorney Steve Sladkus, a partner at Wolf Haldenstein Freeman Adler & Herz.

“Board members should not be paid,” agrees attorney Matthew Leeds, a partner at Ganfer & Shore, adding unequivocally, “They would be looking at the job for the money.”

So what, you might ask, is wrong with doing a job for money? Does a corporate board, aside from most non-profit boards, expect its directors to serve without compensation?

What’s stopping more boards from getting paid apparently begins with tradition. The reluctance to offer a salary goes back at least to the 1940s, when the “Model By-Laws,” issued by the Federal Housing Association, required that the unanimous consent of the shareholders be sought in order to compensate board members.

Read the rest here