Despite what you may have heard recently, director compensation plans remain a valuable non-profit governance tool in most states. Nevertheless, recent related controversies offer non-profit boards a useful opportunity to “kick the tires” of existing and proposed director compensation plans to ensure their legal and “optical” feasibility. This is especially the case in today’s challenging economic environment where regulators are increasingly sensitive to constituent concerns with respect to perceived excessive compensation and self-dealing.

In this article, the authors explore the current controversy emanating from Massachusetts Attorney General Martha Coakley’s recent challenge of director compensation programs, and they stress the current need for non-profit boards to address the legal and policy concerns surrounding this issue.