A nonprofit board is ultimately accountable for big economic choices, but it might delegate the process of setting salaries to a compensation committee. It may also delegate choices in regards to the hiring of an executive, about evaluating efficiency, and about formulating the executive’s compensation packages. Having said that, this does not insulate the organization from liability. Ultimately, the responsibility for all choices normally remains with all the complete board. Delegation does not absolve them from their responsibility for oversight of compensation choices.
By way of example, a popular trap that compensation committees can fall into is usually to accept suggestions from the executive as to what his or her compensation should really be, or employ a compensation consultant referred by the executive. These considerations may perhaps appear harmless adequate, but they nonetheless have the prospective to straight or indirectly slant the view on the board and taint the complete compensation decision-making course of action. Just after the compensation committee formulates its suggestions, the complete board will need to take part in the decision-making course of action, possess a command on the complete facts on the compensation package, and have the chance to go over and approve the package.
