Board Members of For-Profits & Nonprofits Must Educate Themselves About Excessive Compensation (Or Be Held Personally Liable)

The 13-million US board members of for-profit and nonprofit organizations all now have a legal and fiduciary obligation to educate themselves in the matter of senior executive compensation. If they don't, they are vulnerable to IRS sanctions and civil lawsuits. David Thomsen, ASA, Director of the ERI Economic Research Institute, which supplies compensation survey data to the Internal Revenue Service, The New York State Attorney General's Charities Bureau, and more than 5,000 corporations, noted: "Board members of tax-exempt organizations who serve on compensation committees without minimal competencies face Intermediate Sanctions." To meet this dearth of knowledge, ERI and PAQ Services have developed a set of ten one-hour online courses for Board Compensation Committee members.

Redmond, WA (PRWEB) March 13, 2005 -- There has been one news story after another about excessive compensation: whether it's Disney or The Massachusetts Board of the Cabot Family, boards of directors are finding themselves in the glaring spotlight of embarrassment as well as being vulnerable to fines and penalties. It doesn't matter if the compensation committee has such illustrious figures as Sidney Poitier on the Disney compensation board, or if the board comprises lesser known members such as those on the Board of the New York Stock Exchange who voted for excessive pay for Richard Grasso.

The 13-million US board members of for-profit and nonprofit organizations all now have a legal and fiduciary obligation to educate themselves in the matter of senior executive compensation. If they don't, they are vulnerable to IRS sanctions and civil lawsuits. David Thomsen, ASA, Director of the ERI Economic Research Institute, which supplies compensation survey data to the Internal Revenue Service, The New York State Attorney General's Charities Bureau, and more than 5,000 corporations, noted: "Board members of tax-exempt organizations who serve on compensation committees without minimal competencies face Intermediate Sanctions. The IRS rule states `participation includes silence or inaction on the part of an organization manager where the manager is under a duty to speak or act.' Board members now have significant personal liability regarding the executive compensation decisions that they make or condone. The IRS 4958 fine is up to $10,000 per incident for which the boards are responsible, jointly and severally." Thomsen added, "Too many board members of both for-profit and nonprofit organizations simply do not have the executive compensation theory and knowledge that they need to ask essential questions, never mind just making informed decisions. The NYSE Grasso Report, for example, reports on page 99 that most members agreed that their training was fairly limited. Ignorance, of course, is no defense, especially when board members can be fined $10,000 per incident or face lawsuits."

To meet this dearth of knowledge, ERI and PAQ Services have developed a set of ten one-hour online courses for Board Compensation Committee members. The PAQ/ERI Distance Learning Center's Compensation Committee Certificate (CCC) is awarded after successful completion of ten brief Internet training courses. The courses are completed online at www.eridlc.com at the convenience of individual board members.

Jay R. Schuster, Ph.D., of PAQ Services, stated: "There are no other sources that can educate compensation committee members with such convenience and at such a reasonable cost. The CCC is predicated on passing ten course exams, thus making the learning process verifiable. The courses are delivered within a context that is based upon sophisticated research and analysis, relying on the very tools and databases that government regulators use to examine and determine reasonable compensation and benefits. Under Sarbanes-Oxley, and IRS intermediate sanctions, SEC, and NYSE regulations, board members must be knowledgeable about all matters concerning compensation. These course provide that knowledge." As David Thomsen added: "The buck can no longer be passed: it now stops at each board member's pocket."

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