Finance

Questions and answers about compensation of OCLC Trustees

When did OCLC trustees start receiving compensation for their duties?

From 1967 to 1977, OCLC trustees were elected exclusively from Ohio libraries and were not compensated, except for mileage to and from meetings in Columbus, Ohio.

In 1977, in its study of OCLC governance, the consulting firm Arthur D. Little recommended that membership in OCLC be extended to libraries outside Ohio; that the size of the Board of Trustees be expanded from nine to 15 trustees; and that trustees be compensated.

Arthur D. Little went on to recommend election of five trustees from fields outside librarianship in recognition of the increasing complexities of OCLC's governance and operations. The recommendations pertaining to both composition and compensation were unanimously adopted by the new OCLC Board of Trustees, of which OCLC Founder Frederick G. Kilgour was then a member. The thinking remains the same today: namely, that OCLC, in addition to exceptional librarians, requires trustees with other backgrounds, and that all trustees deserve to be paid for their time, expertise and effort.

What are the amounts of trustee compensation?

Compensation of individual trustees varies, based on assignments and workloads. It includes an annual retainer and payments for preparing for and participating in meetings. Trustees are also compensated for chairing committees or taking on additional assignments. The current compensation schedule includes:

Thus, in any given year, total compensation for Board service could range from $30,000 for a regular trustee up to $70,000 for Board Chair.

In addition, trustees are reimbursed for travel based on OCLC's existing travel policy, whereby air travel is limited to coach rate in most instances.

Total annual compensation for each trustee is reported in OCLC's IRS 990 form.

How much time do trustees spend on their board duties?

Service on the OCLC Board of Trustees consumes a significant amount of time, both in preparation for and participation in board and committee meetings. A trustee will spend on average 20 days a year on Board-related matters, including library conferences and Regional and Global Council meetings.

Trustees travel five times a year to participate in regular two-day Board meetings that are held on weekends to reduce travel costs and the time trustees must spend away from their institutions. Travel for trustees who reside outside North America can take four to six days per meeting.

The Board chair typically spends 15 to 20 hours a week on OCLC matters, which includes phone conversations with other board members, the OCLC President and senior management.

A trustee usually spends a minimum of eight hours in preparation for a committee meeting.

Many nonprofit corporations do not compensate their trustees. Why does OCLC?

Trustees of nonprofit boards for local, community-based organizations such as hospitals, museums and orchestras frequently serve without compensation as a way to give back to their communities and, in some cases, enhance professional and personal prestige. Indeed, some organizations require their trustees to contribute significant sums to fund-raising drives, while others, particularly those that receive public subsidies, frequently have political appointees.

It is standard practice to reimburse trustees or directors on the boards of both for-profit corporations and nonprofit entities that are not community-based and do not rely on gifts, grants or public subsidies to operate. OCLC falls into the latter category.

While OCLC's public purposes of furthering access to the world's information and reducing the rate of rise of library costs dominate its plans and activities, it nonetheless must operate in a business-like manner. While a majority of the trustees are librarians, the presence of trustees from areas such as economics and finance, business and accounting, law, government, computer science, higher education administration and communications technology is essential to the Board's success and, therefore, to OCLC's.

Excellent board members with substantial experience in the public and private sectors are in great demand. Having devoted and dedicated board members who are fairly compensated for their time, knowledge and expertise works to the advantage of the OCLC membership.

Why pay librarians to serve on OCLC's Board when many would be willing to serve for free?

Compensating librarians for their service as trustees recognizes that their time and expertise are as valuable as those of non-librarian trustees. Faculty and librarians at academic institutions, as well as public librarians, are permitted by institutional policy to use their professional expertise to consult for pay.

How does the OCLC Board determine what is reasonable compensation?

Compensation is determined by a schedule adopted by the entire board and has not increased since 2001.

The Board regularly reviews its compensation policies with an outside consultant. Most recently, a February 2010 review by the firm of Towers Watson found that OCLC reasonably compensates its trustees within a range consistent with the norms of similar organizations.

Is there an inherent conflict of interest with librarians' serving on the board of a library cooperative from which their libraries purchase goods and services?

No. Most librarians on the Board are legally "inside directors" because they work in institutions that have a contractual relationship with OCLC. Accordingly, trustees annually review their relationships with OCLC and other entities regarding possible conflicts of interest and sign disclosures that are reviewed by the Board's Audit Committee and external auditors. The Board is very careful to ensure that librarian trustees recuse themselves from any decisions where there is a potential for actual or perceived conflict of interest. Moreover, while the Sarbanes-Oxley Act's requirements for full disclosure of possible conflicts of interest do not apply to nonprofits, the OCLC Board has strongly endorsed both their spirit and letter.

Does OCLC board service constitute a conflict of interest within a trustee's home institution?

Trustees are expected to follow their institutions' policies with regard to professional activities for pay and institutional conflicts of interest. For most librarian trustees, the time spent on OCLC matters is entirely in addition to the time they spend working for their institutions.

Is the amount of compensation paid to individual trustees public information?

Yes. By law, the amount of compensation must be reported on the IRS Form 990 tax return for nonprofit corporations. These forms are published and easily found on the Web. OCLC's 990 forms are also available at the following links: 2009, 2010, 2011, 2012.

Why is compensation for former trustees sometimes reported on OCLC's IRS Form 990?

Until 2002 trustees were, under IRS rules, permitted to defer their Board compensation much as many university employees do through 403b plans. Beginning in 2002, the IRS ruled that such compensation could not be deferred going forward, but that compensation already deferred could remain so until withdrawn by the trustee. Thus, payments to former trustees represent withdrawals of compensation earned while they were active trustees but deferred through a plan similar to a 403b or IRA. The IRS requires that withdrawal of these funds be reported on the Form 990, even if already reported earlier.