Marianne Schaefer in Board Operations
Is it time to start paying co-op and condo boards?
Wanted: Someone willing to work long hours, shoulder enormous financial responsibility, and listen to the complaints of angry neighbors. Special bonus: No pay or benefits.
Such a job listing would surely get no takers, right? Wrong – if you judge by the thousands of unpaid volunteers who serve on the city’s co-op and condo boards. Given the hours they put in, the responsibilities they assume, and the abuse they endure, shouldn’t board members be rewarded, financially, for their service?
Arlene Waye, a principal at the property manager firm Awaye Realty, believes the answer is yes. Why? “Because it’s a job,” she says. “They’re running a huge corporation. Board members make major decisions about finances and the physical structure of the building. They have numerous meetings and invest huge amounts of personal time. Plus, you get what you pay for.”
Jay Menachem, an accountant for several co-ops and condominiums, disagrees. “There is no justification to pay board members,” he says. “If you feel you should do your civic duty to your community, you will do it whether you get paid or not. At the most they should get a thank you with a holiday dinner at the end of the year.”
There are no city, state or federal laws prohibiting payment to board members. The underlying condominium or co-op documents are another matter. “In a condominium, the by-laws usually prohibit compensation paid to the members of the board,” explains attorney Matthew Leeds, a partner at Ganfer & Shore. He cites the common provision: “No member of the board shall receive any compensation for acting as such.” But by-laws could be changed by an amendment, he adds, which in a condominium would require a vote of a specified super-majority of the unit-owners.
The proprietary lease in cooperatives, on the other hand, might or might not have a provision concerning payment to the board. Some proprietary leases prohibit salaries unless there is a vote of the shareholders; others do not have such a prohibition. Still, boards should not decide to pay themselves without first winning approval of the shareholders, says Leeds, because of the possible backlash.
Size matters, too. Even Menachem admits there might be some merit to paying board members in a small, self-managed building. “Doing all the bookkeeping, taking care of the finances – that would be a lot of work, and the building can save a great deal of money by not hiring outside management,” he says. “But they still should not get market-value pay.”
So what would be fair pay? Waye, the property manager, believes pay should be in relation to the size of the building. “The compensation level depends on the time a board member needs to do the job,” she says. “At the very least there should be some kind of incentive, may it be a free parking spot or reduction in maintenance.”
Questions beget more questions. What happens when some board members feel they’re doing more work than others? Should they get paid differently? “Beyond that,” says Leeds, “sometimes there are committees doing work for the building that are composed of shareholders who are not on the board. Should anybody doing anything at all get paid?” Another potential downside, he adds, is that paid board members might want to hold onto their positions by any means necessary, which could foster political shenanigans, favoritism, even a spoils system.
While there are compelling arguments for paying board members, Leeds notes that volunteer boards remain the norm in New York City, and paid boards are “as rare as hen’s teeth.” The ancestors of today’s chickens, for your information, lost their teeth about 80 million years ago.
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