Governance Risk & Operations · 25 April 2028
This series has already covered the disclosure obligations that apply once a board decides to pay its directors. What it has not yet covered is the different question a board faces first: the actual decision process for moving from an all-volunteer board to a remunerated one, and the specific, easily missed consequences that decision carries beyond the fee itself.
The First Question, And Why Most Boards Answer It Wrong By Default
Most association constitutions either explicitly prohibit director remuneration or say nothing about it at all, and silence should be read as prohibition, not permission. Before a board can consider paying directors, it must confirm whether its own constitution actually allows this, and in the overwhelming majority of cases, it does not yet. Changing this requires a special resolution, typically needing a seventy-five percent majority of members voting at a meeting, connecting directly to the constitutional amendment discipline discussed throughout this series. A board that has not secured this amendment cannot lawfully pay directors regardless of how strong the internal consensus to do so might be.
The Consequence Most Boards Do Not See Coming
Moving to paid status carries a specific legal consequence beyond simply receiving a fee. The civil liability protections volunteers enjoy under state legislation, connecting directly to the volunteer protection discipline discussed earlier in this series, generally cease to apply once a director becomes paid. Directors who move from unpaid to remunerated status are trading a specific legal protection for the payment they receive, and a board weighing this decision should understand this trade-off explicitly rather than discovering it only after the change has already taken effect. Paid directorships may also trigger superannuation obligations, an additional, easily overlooked cost beyond the director fee itself. A director accepting payment for the first time is not simply gaining income. They are exchanging the volunteer liability protections this series has already established as real and valuable for a fee that needs to be weighed against what is being given up.
The Additional Regulatory Layer Some Boards Miss
Beyond the constitutional amendment, additional regulatory approval can apply depending on your association's specific activities and location. Charities fundraising in New South Wales, for example, must obtain separate approval from the state's fundraising regulator before paying directors, a specific requirement distinct from the constitutional change itself. A board should also review existing grant and funding agreements for any restriction on paying directors, connecting directly to the grant compliance discipline discussed earlier in this series, since a funding condition can prohibit director remuneration even where the constitution and general law would otherwise allow it.
The Two-Step Approval Structure Worth Building In Deliberately
best practice separates the decision to permit remuneration in principle from the decision setting the actual amount. The constitutional amendment establishes that directors can be paid at all. A separate resolution, ideally also requiring member approval even where not strictly mandated, should then determine the specific remuneration structure and figures. This two-step process gives members an opportunity to weigh in on both the principle and the practical detail separately, rather than being asked to approve an open-ended power in a single vote.
- Confirm what your constitution currently says about director remuneration before any substantive discussion proceeds, treating silence as prohibition rather than permission.
- Communicate transparently and continuously with members throughout the process, rather than presenting a fully drafted constitutional amendment for approval only at the AGM itself.
- Understand explicitly that moving to paid status removes the volunteer civil liability protections discussed earlier in this series, and weigh this trade-off deliberately rather than discovering it afterward.
- Check every existing grant and funding agreement for restrictions on director payment, and confirm whether any state-specific regulatory approval, such as NSW's fundraising authority requirement, applies.
- Separate the constitutional amendment permitting remuneration in principle from the subsequent resolution setting the actual amount, giving members a genuine, distinct opportunity to weigh in on each.
The decision to begin paying directors is a governance transformation, not a simple budget line item. It changes the legal protections directors hold, may trigger new compliance obligations, and requires a transparent process with members well before the disclosure rules this series has already covered ever come into play.
This is one of the practical governance topics built into our Board Director course — alongside the papers, tools and frameworks that turn the principle into your board's actual practice. Explore the course →
— Annie