Compensation for Governance in Grantmaking Foundations

Private and community grantmaking foundations are part of the U.S. nonprofit sector, although they primarily distribute funds rather than seek them. Like all nonprofit organizations, they are governed by a board of directors or trustees. Despite normative expectations that members of charitable boards work without compensation, many grantmaking foundations provide fees and other benefits to their trustees. Although these payments are required by law to be reasonable and necessary, some compensation is demonstrably high and occasionally incidental to the effective operation of the foundation. This article documents and probes the practice of individual and institutional trustee compensation in the 10,000 largest U.S. grantmaking foundations. It shows that the practice is common, if not widespread. Typical trustee compensation is not necessarily unreasonable, although cases in the upper distribution might deserve more regulatory and public scrutiny. Independent foundations, larger foundations, those with staff, and those with any endowment are most likely to engage in individual trustee compensation.