Who Pays for Board Meeting Expenses: Board Members or the Company?

Many questions arise in the smooth operation of corporate governance, one of which revolves around who should bear the financial burden of board meetings. Specifically, should board members or the company cover the related expenses? This article aims to clarify the common practice, explore the potential impact on board members and companies, and offer insights for effective board operations.

Common Practices and Realities

Typically, the company covers the expenses related to board meetings, encompassing costs such as travel, accommodation, meals, and other miscellaneous expenses incurred by board members. This is a widely accepted practice as it aligns with the responsibility that board members have towards the organization. However, specifics can vary based on company policies, governance practices, and the agreements in place with board members.

Practical Observations and Anecdotes

In most reputable and established companies, it is common practice for the company to reimburse board members for reasonable travel and accommodation costs, along with stipends if applicable. This is seen as a form of compensation for the time and efforts they contribute to the organization. However, startups or nonprofits might operate differently due to financial constraints.

As noted by Gary Sutton, in startups or organizations where board members are also contributing their expertise through other means, such as holding stock, the company might not always cover all expenses. Instead, the board members might pay their own way or combine board meetings with other business trips. In some scenarios, the board member might pay for transport, while the company covers the hotel and meals. For non-profit organizations, the payment for expenses is often less common, and board members might not expect full reimbursement.

The Dependence on Negotiation

Ultimately, the responsibility for paying board meeting expenses hinges on the terms of the agreement and the negotiation process. For instance, board members of larger, well-established firms like IBM would typically not have to bear any expenses, unless their contract specifies otherwise. Conversely, in smaller firms or startups, where cash flow might be limited, board members often pay their own expenses or integrate board meetings with other business activities.

Scheduling Board Meetings and Cost Management

Board member Brad Silverberg also suggests that if a board member cannot think of better uses for the capital, they should consider how to leverage their valuable time for more significant contributions to the company. For instance, board members could propose innovative ways to utilize funds allocated for board meetings to address critical issues, such as recruiting new talent.

As an example, Brad Silverberg recounted a situation where the biggest challenge was recruiting new engineers. He posed the question: 'Can you think of five ways to use this $1000 to get a new engineer?' This approach not only addresses the problem but also utilizes resources more efficiently.

Personal Experience

The author of this article had a similar experience. They served on a board in New York City and attended board meetings once a quarter, which required physical presence. By maneuvering their business meetings around these trips, the author did not always ask the company to cover expenses. This illustrates that the decision to bear or not bear expenses can be influenced by personal scheduling and organizational cost management strategies.

Conclusion

Whether board members or the company should cover board meeting expenses depends on the specific circumstances and individual negotiations. While it is common for the company to cover these expenses, in smaller firms or startups, adjustments might be necessary. It is essential to strive for cost-effective and efficient operations that bring the most benefits to both the board members and the organization.