The Case For and Against Remunerating Non-Executive Directors on Not-for-Profit Boards in Australia: An Investment Propellant for Growth or a Risk to the Volunteer Ethos?

Not-for-profit (NFP) organisations are the backbone of Australian society. They fill the gaps left by the government and private sector by delivering essential services in health, aged care, social services, education, environment, and community support. However, the demands on their boards have never been greater. Rising regulatory scrutiny, cyber risks, funding pressures, and the need for strategic growth mean non-executive directors (NEDs) are shouldering more responsibility than ever.

One question is increasingly top-of-mind for NFP boards: Should we remunerate our non-executive directors?

At Sadhana Consulting, we help NFPs strengthen governance through Board Performance Reviews, strategic planning, and financial management. The debate around director remuneration is not black-and-white. It can be a powerful investment in growth - or a step that risks diluting the very volunteer spirit that defines the sector. This decision requires careful consideration for an informed outcome.

Here’s a balanced, evidence-based look at both sides, grounded in the latest data from the Australian Institute of Company Directors (AICD) and the Australian Charities and Not-for-profits Commission (ACNC).

The Case For: Remuneration as a Strategic Investment Propellant for Growth

Modern NFP boards operate in a complex environment. The AICD’s Not-for-Profit Governance & Performance Study 2025-26 reveals that 27% of non-executive directors are now remunerated (up from 24% in 2024). This trend is most pronounced in larger or more complex organisations. Directors are committing significant and increasing time, often including multiple board and committee meetings, site visits, professional development, and preparation. They also shoulder heightened legal liabilities under the Corporations Act, ACNC Governance Standards, and sector-specific regulations.

Remuneration acts as a catalyst for sustainable growth in several ways:

• Attracts and retains top talent, specialist skills, and diversity. Paying directors helps NFPs compete for candidates with expertise in finance, cyber risk, digital transformation, compliance, and lived experience. It removes financial barriers for younger professionals, people from disadvantaged backgrounds, or those with caring responsibilities. This broadens the talent pool and boosts inclusivity and innovation. Market data shows that remuneration is increasingly used to support succession planning and ensure boards have the right mix of skills for strategic delivery.

• Professionalises governance and drives performance. Remuneration creates “skin in the game,” fostering greater accountability, engagement, and commitment. Directors approach their role with heightened rigour, which strengthens strategic oversight, risk management, fundraising effectiveness, and long-term sustainability. This can directly multiply organisational impact - growing revenue, visibility, and mission delivery. Many organisations view modest or median-level fees as a small outlay compared to the value delivered through stronger governance.

• Delivers clear return on investment. In today’s environment, top-quality governance is a growth propellant. Remuneration recognises the real time commitment, expertise, and personal risk directors accept. It positions NFPs to navigate complexity more effectively, supporting ambitious strategic objectives without compromising purpose. Many boards start with modest fees and transition to reasonable levels (with annual CPI reviews) as financial capacity allows, ensuring affordability while building board strength.

• Supports inclusivity without losing volunteer ethos. Remunerated directors may still donate fees back or volunteer extra time. It legitimises the contribution while opening doors to a wider, more diverse pool of candidates.

  
  

For NFPs facing skills gaps or growth ambitions, targeted remuneration is a smart, strategic lever.

A modern diverse skills based board in a meeting.

The Case Against: Why Many Not-for-Profit Boards Choose to Stay Voluntary

Despite the upward trend, the vast majority of NFP boards remain unpaid. There are compelling reasons to preserve the volunteer model.

Key arguments for staying voluntary include:

• Protecting the mission and donor trust. Every dollar spent on directors’ fees is a dollar not directed to frontline services. Some donors and supporters view payment as inconsistent with the charitable ethos, potentially harming fundraising and public perception. The ACNC emphasises that payments must further the charitable purpose and be carefully justified.

• Preserving the volunteer spirit and moral authority. The heart of the NFP sector is community-driven altruism. Payment risks attracting people for the wrong reasons or creating internal tensions. Many directors proudly serve without pay, seeing it as part of their contribution to a better world. The traditional volunteer model continues to attract passionate, mission-aligned leaders effectively.

• Financial and practical realities. Remuneration introduces new costs and complexities: Constitutional amendments, member approval at AGM, tax and superannuation implications, additional ACNC reporting, and ongoing financial sustainability assessments. For many organisations - particularly smaller or donation-reliant ones - it simply isn’t affordable or necessary. Stakeholders may also regard it as an unnecessary expense, creating reputational considerations.

• No guaranteed improvement in outcomes. While remuneration can widen the candidate pool, there is no automatic assurance of better performance. The volunteer model keeps costs low, maintains public trust, and upholds core values where organisations are community-embedded.

  
  

Staying voluntary continues to work well for many NFPs, especially where passion and purpose are the primary drivers.

Weighing the Decision: What’s Right for Your Organisation?

There is no one-size-fits-all answer. Remuneration suits larger or more complex NFPs where governance demands are high and growth ambitions significant. For others, the volunteer model remains powerful and appropriate.

Key questions to ask your board:

• Can we afford meaningful remuneration without impacting programs?

• Does our Constitution and funding agreements allow it?

• Are we struggling to attract the specialist skills needed for growth and compliance?

• How will stakeholders (donors, members, funders) perceive the change?

  
  

Transparency is non-negotiable: any decision must further the charitable purpose, be reasonable, properly authorised, and clearly communicated (per ACNC guidance). Many organisations adopt a staged approach - starting modestly, reviewing annually against financial sustainability and CPI, and adjusting as capacity grows.

At Sadhana Consulting, we recommend starting with an independent Board Performance Review, which can include a remuneration benchmarking exercise with options for consideration. This process evaluates current governance effectiveness, structure, identifies skills gaps, and provides clear recommendations on whether remuneration (or other enhancements like targeted training or board size adjustments) would propel your organisation’s growth.

Ready to Strengthen Your Board for Sustainable Growth?

Whether your NFP board is considering remuneration or simply wants to operate at its highest level, professional governance is the ultimate growth propellant.

Contact Sadhana Consulting today for a confidential discussion about Board Performance Reviews, Governance Consulting, or strategic financial management support. Let’s ensure your board is equipped to deliver excellence - volunteer-powered or strategically remunerated.

Kylie Johnson

Principal Consultant

kylie.johnson@sadhana.com.au

Ph: 0403 500 754