Can Nonprofit Founder Board Members Obtain Salaried Positions within Same Organization?

September 23, 2008 5:28 PM

Board Members who founded non-profit want to obtain salaried positions within the same organization. How is this handled?

A friend and myself recently started a non-profit organization. It is incorporated and has 501(c)3 status. We currently serve as two of the initial three required Board of Director members as per the application process.

The thing is that we want to be able to make a living from doing the work that we started this organization to do. We would like to have salaried positions within the organization, but we would also like to be able to have major input into the direction the organization takes as it is still young (9 months), and we are trying our hardest to get funding for salaries (among other things) within the next year.

What is the best mode of moving forward in this situation for us as individuals and for the vision of the organization that we created?

posted by franklen to Work & Money (8 answers total)

Best answer: Resign from the board. Fill your places with other people who do not want to work at the organization. Have the board hire the two of you in specific staff roles as officers of the organization. Be sure that the bylaws of the organization include a proviso that those officers participate in board meetings. Work unpaid in those roles until the money for your salary appears.

There is nothing that makes the IRS as suspicious as board members drawing salaries from a 501 (c) 3. It's "self-dealing" and it freaks them out.

Now, you may say "But how do I have control over the future of the organization if I am a staff member who works for the board?" The answer is, you don't. And that's on purpose.
posted by Sidhedevil at 5:44 PM on September 23, 2008 [2 favorites]

Find successors for yourselves on the board of directors,
resign your positions on the board of directors,
and apply for the salaried positions that you are interested in.
With luck, you'll be the most qualified candidates for the
positions, and you'll get the jobs.

You certainly wouldn't want the appearance of private benefit
with the move from director to salaried worker.
posted by the Real Dan at 5:57 PM on September 23, 2008

resign from the board, advertise the opportunity, get hired, then nominate yourselves to the board.
posted by parmanparman at 7:11 PM on September 23, 2008

Nthing that you need to move off of the BOD and into Founder/President-land.
posted by desuetude at 8:02 PM on September 23, 2008

Nthing (+1) the quit-the-board-get-hired-as-staff advice. Also, please take seriously this change in roles. I've worked and volunteered for nonprofits where the founder/president was also the board chair and basically refused to give up any control whatsoever. This is the surest way to get in legal hot water and/or kill an organization.

Pick board members who will be good for the organization, not just those that will be good for you. Ideally you'll have a lawyer and an accountant/bookkeeper type. Work with them to develop job descriptions that will allow you and your cofounder to have significant programmatic and strategic oversight. But it's really, really important to have board members that will hold you accountable. This isn't because you're a horrible person who will break laws, but because no organization can survive beyond the startup phase without accountability measures in place.

Finally, seriously consider having both you and your cofounder give yourselves 'term limits" for your positions. Once those term limits are up, you hire replacements and go back to the board. Either that, or make sure you two are exceptional at the art of keeping the organization from revolving around yourselves, which is a lot harder than it sounds.

Sorry, I know this advice is sort of harsh, but I've seen founder situations get really messy in nonprofits that could have been a lot more effective than they were/are.
posted by lunasol at 8:25 PM on September 23, 2008 [1 favorite]

Just want to caution against the last piece of parmanparman's advice. While I don't know exactly how it works in the US, it is usually quite irregular for paid staff of a non-profit to nominate themselves onto their Board.

I work as senior management for a mid-size non-profit. My role with regards to full Board meetings is as an adviser/expert on operations. I do not participate in votes, but provide information and input - when invited - to help the Board make decisions (My boss, the ED of the organization, is an ex-officio member of the Board. She cannot vote on most motions.) In your case, as a Founder, you will probably be listened to quite closely, but you want that separation of staff versus Board. Otherwise the whole thing looks very suspicious and can wind up in massive operational difficultly.
posted by never used baby shoes at 9:36 AM on September 24, 2008 [1 favorite]

Just want to caution against the last piece of parmanparman's advice. While I don't know exactly how it works in the US, it is usually quite irregular for paid staff of a non-profit to nominate themselves onto their Board.

Seconded. I'm mid-level management in a fairly large US non-profit org, and the standard is exactly the same as the scenario presented by never used baby shoes.
posted by desuetude at 9:48 AM on September 24, 2008

While I don't know exactly how it works in the US, it is usually quite irregular for paid staff of a non-profit to nominate themselves onto their Board.

This is not done in the US either. The norm is for certain officers of the corporation (usually the CEO and CFO) to participate in board meetings and offer advice/counsel/updates, but have no vote.
posted by Sidhedevil at 9:33 PM on September 24, 2008