Reasonable compensation is not defined by numbers but can vary greatly depending on the experience of the individual, the number of people served, the hours worked and what people are being paid in a similar position (whether that be in MMJ industry or another non-profit setting). A highly educated individual who has given up a high paying job to purse a career in medical marijuana has a better chance justifying a high compensation package than someone with little real world experience (and no prior earning records).
Most California dispensaries are set up as a form of not-for-profit corporation or coop as opposed to a traditional 501c(3) nonprofit. However, we can look to the nonprofit arena for compensation guidelines – theses entities are in parallel to how a proper California medical marijuana dispensary should be run.
According the Council of Nonprofits there is a three step process to review management compensation:
- Create a review committee
- An independent body should be chosen (by the board to conduct a salary analysis or comparability review. The people receiving the compensation should not be included in this body/group.
- Conduct Comparative Analysis
- This comparable salary review would compare data from similar sized entities, similar location, and even similar mission (if available). There is a comprehensive nonprofit compensation report available through Guidstar.com but it is priced at $349 and may not be feasible for smaller start-ups. However, a board can do their own due diligence online including reviewing individual 990 tax returns to get an idea of management compensation.
- It will likely be difficult to find the compensation of other local medical marijuana dispensaries however, you should be able to find info on local non-profits which will help develop a foundation for the current compensation levels.
- More details on the process a board should use to review data can be found in the instructions to IRS from 990.
- Document the Process and Final Outcome
- The independent body should document who was involved in the process and how a final compensation was arrived at including recording (in minutes) what documentation was reviewed/relied on, what members of the body agreed on compensation and any other items of relevance.
By following the IRS process for approving medical marijuana compensation the entity will help protect from allegations that the compensation is unreasonable or too high.