How much may a foundation board member or an association president earn?

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How much may a foundation board member or an association president earn?
In Switzerland, there are currently around 12,500 foundations, 76,000 associations and 10,000 cooperatives. Non-profit work is becoming all the more important as the state withdraws from previous areas of responsibility in order to save money. A recently published study takes a comprehensive stand for the first time on the previous practice of supervisory and tax authorities: moderate compensation does not call the nonprofit system into question - on the contrary. In the future, too, there must be enough volunteers willing to take on responsibility and expose themselves to liability risk.

Until now, nonprofit organizations (NPOs) have mostly been run by volunteer boards of directors and foundation boards and compensated only with reimbursement of expenses. According to estimates, volunteers in Switzerland perform work equivalent to about 80,000 full-time positions annually. Foundations alone have an estimated need of about 76,000 foundation councils. However, developments in recent years give reason to put "pure" volunteerism to the test. The steadily growing number of NPOs - half of all charitable foundations have been established in the last ten years - is being confronted with ever-increasing demands. On the one hand, new legal regulations are constantly emerging; on the other hand, the sector is undergoing a pronounced phase of professionalization. For many foundation and association boards, the professional and time requirements are now comparable to those of SME boards of directors, and the liability risks are even far greater due to the lack of a decharge option.

Increasing acceptance by the authorities

The study published by the University of Basel was written by Kaspar Müller and Daniel Zöbeli. Their systematic survey of the most important foundation supervisory and tax authorities shows that moderate and performance-related compensation of non-profit governing bodies is increasingly accepted. For example, the Baselland supervisory authority points out in an information letter that "in today’s environment and depending on the size and area of activity, the management of foundations requires the use of professional staff". Therefore, "on the basis of a regulatory foundation, a moderate attendance fee that does not exceed the usual level" can be set. Obvious abuses such as compensation excesses in the non-profit sector are rare.

The authors of the study state that compensation for professional work does not fundamentally challenge the nonprofit system - quite the opposite. From an efficiency perspective, moderate compensation is appropriate as long as the work performed is worth more than the pay. In addition, it is easier for the organization to demand the corresponding performance in a binding quality.

Compensation for operational activities

Basically, a distinction is made between (fixed) position compensation and meeting fees for the strategic management of the organization and compensation for extraordinary, mostly operational activities. While for the former, meeting compensations between 200 and 300 Swiss francs are accepted on average, members of the highest governance body can be compensated for tasks that go beyond the ordinary activities according to the Swiss Tax Conference according to standard market coniditions. However, it is important that these principles are set out in writing in a set of regulations and approved by a higher authority. The transparency requirement also demands that the compensation of association boards and foundation boards be disclosed in the annual financial statements.

One point has hardly been mentioned in the current debate so far: Instead of payment, there are many other ways in practice to provide indirect benefits to foundation boards and association directors - and these are then usually anything but systematic, fair or transparent. For example, overpriced performance contracts are awarded to foundation boards or board members benefit from free services (luxurious hotel and restaurant visits, free vacations in the clubhouse, free use of the office), and so on. In addition, especially in the case of wealthy institutions, there is a risk that they could benefit from kickbacks and all kinds of other "gifts" in the investment area.