Bankrolling the Board The Question of Compensation

Co-op and condo board members are charged with the all-important responsibility to make critical policy decisions that ensure the building, the property, and their neighbors' interests are cared for and protected. It's a job that requires looking out for others, and most of the time it comes with very little gratitude or recognition, if any. Considering the amount of hours the job requires, it’s surprising that in almost all cases there is no compensation—a longstanding rule.

“Co-op and condo board seats have historically been viewed as volunteer positions. The corporations [and] associations for which they serve are not-for-profit, and the work of the board members benefits the board members as well as shareholders or unit owners,” says Attorney Stephen O’Connell, a partner with the law firm of Smith, Gambrell & Russell, LLP in Manhattan.

Governing documents normally prohibit the concept of compensation altogether. The conventional wisdom isn’t so much about the actual money, although it’s a serious financial consideration, but rather the influence salary or compensation may have on a board members’ ability to govern. “Co-ops and condos are organized and managed for the benefit of their residents living in a communal setting, not to make a profit. Non-profit organizations generally do not compensate board members,” said Attorney Mindy Stern, a partner with the law firm of Schoeman Updike Kaufman & Stern LLP in Manhattan. “No one asks board members to serve, they volunteer their time. This has been the case since the inception of co-ops and condos.”

Stern adds that unless the co-op or condo has very few units, most boards engage a management company to supervise day-to-day operations for which the management company is compensated. “This leaves the more global strategic decisions in the hands of the volunteer board members,” she says.  

While a compensation model could be determined by a stipend, a flat fee or monies provided for attending often lengthy board meetings, the practice in New York is rare, says Ronald Sher, an attorney and founding partner with the law firm of Himmelfarb & Sher, LLP in White Plains. “We neither recommend nor endorse compensation due to the appearance of impropriety or conflict of interest,” says Sher. “The same principle is applicable for both members of a co-op or condo board regarding the prohibition in receiving compensation or salary.”

Read More...

Related Articles

NYC Finally Has Its Own CAI Chapter

Group Introduces Big Apple CAI

Building a Stronger Community

Encouraging Neighbors

A Look at the Westchester CCAC

A Sounding Board for the County's Co-ops and Condos