Why is it important for organizations to disclose details of the purpose and amount of payments made to board members or companies in which board members have an interest? Standard A19 of Section A: Board Governance states that no member of the board is entitled to receive, either directly or indirectly, any salary, wages, fees, commissions or other amount for services rendered to the organization in their capacity as a director. “In their capacity as a director” means that board members may be paid for services they provide to the nonprofit or charitable organization in another role, for example as a consultant. However, disclosing the amount and purpose of these payments is an essential component of financial transparency for nonprofits and charities.
Paying a board member or an organization in which a board member is an important stakeholder, for instance an owner, partner, or senior manager, can appear to be a significant conflict of interest. Perceived or actual conflicts of interest can damage your organization’s reputation and impact perceptions of the nonprofit sector as a whole. Your organization’s conflict of interest policy (see Standard A12.) will set out the process to follow for directors who have an interest in one of the organization’s contracts. Disclosing the details of payments for products or services made to board members or companies in which board members have an interest demonstrates to stakeholders that your organization is following its conflict of interest policy and will help to build your organization’s reputation for ethical financial practices.
Note for provincially incorporated charities: Certain provinces prohibit directors from receiving any remuneration in any capacity, as this is seen as an inherent conflict of interest.1
What does the Canada Not-for-profit Corporations Act say about the compensation of board members? The Canada Not-for-profit Corporations Act allows directors to receive reasonable remuneration for their expenses or services to the corporation.
From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency," Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.
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Standards Reference Guide