All compensation committees should really “paper its trails to cover its tail.” In other words, document almost everything meticulously. Comprehensive minutes of what’s discussed at compensation committee meetings and how all of the difficulties are resolved can go a extended way in avoiding future charges of favoritism or arbitrariness. This can be correct for each substantial nonprofits, at the same time as smaller sized communitybased organizations, for the reason that salaries are normally a important portion of an
organization’s price range.
In actual fact, IRS regulations specify that a compensation committee will need to adequately and within a timely manner document the basis for its determination concurrently when producing its determination. You'd like to prevent possessing to reconstruct what a committee did weeks, months, and even years later. One particular solution to be certain your organization meets this requirement is usually to have the compensation committee hold minutes of its meetings. The minutes should really include things like the following products:
organization’s price range.
In actual fact, IRS regulations specify that a compensation committee will need to adequately and within a timely manner document the basis for its determination concurrently when producing its determination. You'd like to prevent possessing to reconstruct what a committee did weeks, months, and even years later. One particular solution to be certain your organization meets this requirement is usually to have the compensation committee hold minutes of its meetings. The minutes should really include things like the following products:
- Attendees: The minutes should really include things like a list of attendees, their titles or roles, and how they voted on the difficulties that had been discussed.
- Consideration of conflicts: Prospective conflicts of interest of any members on the compensation committee should really be absolutely aired and completely discussed, and these discussions should really be documented in detail.
- The date the compensation package was authorized: Dates of approval are vital for the reason that the IRS suggestions call for preapproval, not postapproval, of compensation packages.
- Due diligence: Minutes should really also reflect that the committee took the time and difficulty to get and assessment the vital information about comparable salaries. The comparability information that was obtained and relied on should really either be referenced and out there for later assessment, or included with all the minutes themselves.
- Terms on the compensation package: It is vital to document that all on the charges on the compensation package had been viewed as and especially authorized.
A compensation committee that follows these suggestions are going to be presumed to have acted reasonably in setting an officer’s compensation. The IRS can refute this presumption of reasonableness only by creating enough contrary evidence to rebut the information that the committee relied on. If the committee does not satisfy the preceding IRS suggestions, the IRS will appear in the distinct details and circumstances to identify no matter if the compensation is affordable.
