On Tuesday, September 27, 2011, the Massachusetts Joint
Committee on the Judiciary heard testimony on H.3516 – a
bill that would regulate compensation of board members for public
The bill, introduced by Representative Martha Walz, would
prohibit Massachusetts-based public charities from compensating
independent (non-employee) officers, directors and trustees, except
in instances where the charity can make a clear and convincing
showing, by means of an application to the Non-Profit
Organizations/Public Charities Division of the Attorney
General's Office (AGO), that compensation is necessary to
enable the public charity to attract and retain the services of
experienced and competent individuals. The bill allows the AGO to
prescribe criteria for approval of such applications, and also
allows the AGO to rescind its approval if it determines that the
level of compensation paid by the public charity exceeds what is
Attorney General Martha Coakley testified in favor of the bill,
arguing that compensation of board members of public charities
raises conflict of interest concerns and is antithetical to the
charitable mission of the organizations that the board members
serve, concluding that "voluntary service has been the rule
historically and makes sense."
The Attorney General was joined in testifying in support of the
bill by Representative Walz, as well as Senator Mark Montigny, who
has introduced similar legislation in the Senate, and Professor F.
Warren McFarlan of Harvard Business School, who testified that, in
his experience, public charities have no trouble attracting
qualified individuals to board service absent compensation.
Testifying in opposition to the bill, Jeffrey Poulos, the
Executive Director of Associated Grant Makers, argued that current
laws sufficiently regulate director compensation at public
We have previously
covered the increased scrutiny of public charities that choose
to compensate independent directors, and will continue to track the
progress of H.3516, as well as similar legislation pending before
the Senate. Foley Hoag is available to assist organizations and
their boards in navigating the requirements that may be imposed by
this legislation. All Massachusetts-based public charities are
well-advised to assess the processes and rationale by which
decisions about independent director compensation are made.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
An investment firm announced that it will pay approximately $194 million to compensate certain clients for a proxy voting error made in connection with the leveraged buyout of a computer technology company in 2013.
It should be clear that a transfer price determined not to reflect the market price or book value cannot be a ground for the licensing authority to block the transfer by refusing the issuance of its approval.
The SEC settled charges against a private equity fund advisory firm and its owner for engaging in brokerage activity and imposing fees without registering as a broker-dealer, among other securities law violations.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).