View source for Policies/EducateONE Organizational Policy § 9.1.00. Executive Compensation

= Article I. EducateONE Organizational Policies =

== Chapter 9. Compensation, Reimbursement, and Excess Benefit Controls ==

== EducateONE Organizational Policy § 9.1.00. Executive Compensation. ==
(a) Policy and Purposes.

(1) This is the policy of EducateONE with respect to the review and approval of compensation of its directors, officers, and executive employees.

(2) It is the policy of EducateONE that all compensation paid by EducateONE, based upon a review of comparability information, be fair and reasonable and not excessive.

(3) This policy is intended to supplement and/or implement state and federal laws governing executive compensation that are applicable to nonprofit organizations.

(b) Compensated Individuals Covered by Policy.

(1) This policy provides a procedure for the review and approval of the compensation of Compensated Individuals.

(2) For purposes of this policy, “Compensated Individuals” are:

(A) EducateONE’s directors, officers, Chief Executive Officer, Executive Director, Chief Operating Officer, Chief Financial Officer, Treasurer, General Counsel, and any person with equivalent powers, duties, or responsibilities;

(B) any other disqualified person defined in Internal Revenue Code section 4958; and

(C) officers and key employees whose compensation is or would be reportable on IRS Form 990 or Form 990-EZ.

(c) Governing Body.

(1) The Board of Directors, excluding any director with a conflict of interest with respect to the compensation arrangement at issue, shall approve the compensation of Compensated Individuals.

(2) For purposes of this policy, the Board of Directors acting under this section is referred to as the “Governing Body.”

(d) Approval by Persons Without a Conflict of Interest.

(1) Compensation of Compensated Individuals shall be approved by the Governing Body, provided that persons with a conflict of interest with respect to the compensation arrangement at issue are not involved.

(2) Members of the Governing Body do not have a conflict of interest if they:

(A) are not benefitting from or participating in the compensation arrangement or a family member of any such person;

(B) are not in an employment relationship subject to the direction or control of any person benefitting from or participating in the compensation arrangement;

(C) do not receive compensation or other payments subject to the approval of any person benefitting from or participating in the compensation arrangement;

(D) have no material financial interest affected by the compensation arrangement; and

(E) do not approve a transaction providing economic benefits to any person participating in the compensation arrangement, who in turn has or will approve a transaction providing economic benefits to the member.

(e) Use of Comparability Data.

(1) In reviewing and approving compensation, the Governing Body shall rely upon comparability data to affirmatively determine that the compensation of the Compensated Individual is reasonable to EducateONE based upon information sufficient to determine whether the value of services is the amount that would ordinarily be paid for like services by like enterprises, whether taxable or tax exempt, under like circumstances.

(2) Relevant information includes, but is not limited to:

(A) compensation levels paid by similarly situated organizations, both taxable and tax exempt, for functionally comparable positions;

(B) the availability of similar services in the geographic area of EducateONE;

(C) current compensation surveys compiled by independent firms; and

(D) actual written offers from similar organizations competing for the services of the Compensated Individual.

(3) If EducateONE has average annual gross receipts of less than $1 million for the prior three tax years, the Governing Body will be deemed to have obtained appropriate comparability information if it has information on compensation paid by three comparable organizations in the same or similar communities for similar services.

(f) Compensation to Be Considered by Governing Body.

(1) In determining whether the compensation paid to the Compensated Individual is reasonable, the Governing Body must take into account all benefits paid to the Compensated Individual by EducateONE.

(2) Such benefits include, but are not limited to:

(A) base salary;

(B) fees;

(C) bonuses;

(D) severance payments;

(E) retirement benefits;

(F) fringe benefits; and

(G) payments to welfare benefit plans, including plans providing medical, dental, life insurance, and disability benefits.

(g) Prohibited Excess Compensation and Parachute Payments.

(1) The Governing Body shall not approve:

(A) compensation to any individual in excess of $1 million for a taxable year, including compensation paid by any entity related to EducateONE;

(B) a payment to a highly compensated employee, as defined in Internal Revenue Code section 414(q), that is contingent on the employee’s involuntary separation from EducateONE and where the present value of the payment is equal to or exceeds an amount equal to three times the employee’s average taxable wages; or

(C) any compensation arrangement that would result in an excise tax under Internal Revenue Code section 4960.

(2) If the Governing Body is uncertain whether a proposed compensation arrangement would fall within this subdivision, the Governing Body shall consult with an attorney or tax professional before approving the arrangement.

(3) This subdivision may be amended by the Board of Directors if future circumstances warrant, but unless and until formally amended, the prohibitions in this subdivision shall apply.

(h) Recording Compensation Deliberations.

(1) The Governing Body shall contemporaneously document and maintain records with respect to the deliberations and decisions regarding the compensation arrangement.

(2) The documentation of the decision shall include:

(A) the terms of the compensation;

(B) the date approved;

(C) the names of the members of the Governing Body who were present during the discussion;

(D) the comparability data obtained and relied upon, and how it was obtained;

(E) any action taken with respect to consideration of the compensation by a member of the Governing Body who had a conflict of interest with respect to the compensation;

(F) results of the vote on the compensation arrangement, including approvals and rejections by each voting member;

(G) if the reasonable compensation is higher or lower than the range of comparability data obtained, the basis for the decision; and

(H) if the Governing Body consulted with an attorney or tax professional pursuant to subdivision (g), documentation that such consultation occurred and the Governing Body’s determination that the proposed arrangement does not violate subdivision (g).

(3) Such records of the deliberations and decisions shall be prepared before the later of the next meeting of the Governing Body or sixty days after the decision as to compensation was made.

(4) Such records shall be approved by the Governing Body as reasonable, accurate, and complete within a reasonable time period after preparation.

(i) Schedule of Compensation Deliberations.

(1) The Governing Body’s review and approval of compensation shall occur:

(A) initially upon hiring;

(B) whenever the term of employment, if any, is renewed or extended; and

(C) whenever the compensation is modified.

(2) Separate review and approval shall not be required if a modification of compensation extends to substantially all employees.
----Source Note

This policy is adapted from Public Counsel’s Community Development Project, Annotated Executive Compensation Policy, May 2022, including its “Form of Executive Compensation Policy for a California Nonprofit Public Benefit Corporation.” The annotations and explanatory endnotes have been omitted from this EducateONE draft.