The structure of a board of directors has evolved over the years. There was a time when most—if not all—corporate board members were company employees, as they had a vested interest in the company’s governance structure.
Over time, opinions shifted and boards began to realize they can take action with greater clarity when none of the members are active employees.
Even though a CEO and senior manager may attend board meetings, they often don’t hold voting power. While it’s possible for an employee to be part of a board of directors, it occurs less frequently today compared to a few decades ago.
What is a Board Member?
A board member is a voting member of a company’s board of directors. The directors are a separate governing body that helps to guide a company toward profitable, ethical, and legally compliant success. A board of directors typically consists of experienced business executives who are paid separately as consultants, not direct employees of the company.
Board members are essential because they provide specialized insight and big-picture planning. Their perspective isn’t clouded by the day-to-day concerns of employees, managers, and even executives within the company. This ensures they can make sound business decisions while avoiding conflicts of interest.
Can a Board Member Also be an Employee?
There’s no law prohibiting an employee from becoming a board member, or an executive board member from becoming an employee.
However, employees often experience a conflict of interest when acting as board members, notably because all employees, including the CEO, are directly affected by board decisions. These decisions frequently include matters of pay, benefits, and operational policies.
Concerns Regarding Employee Board Members
There are a few concerns to address when someone serves as both a corporate board member and an employee of the same company.
Employees are considered employees of the company first and board members second. They’re subject to all company policies and may be affected directly by the decisions of the board. They also do not become exempt from company policies because of their position on the board.
If an employee believes they have a conflict of interest during a board meeting, they must immediately disclose the issue and recuse themselves from the voting process. Failing to avoid conflicts of interest can result in legal consequences.
Serving as a board member is also time-consuming. The time requirement becomes more profound when an employee serves in both roles simultaneously. In some cases, an employee may take a leave of absence while they serve as a board member.
Requirements to Create an Employee Board Member
Companies typically follow these requirements when an employee becomes a board member.
- Company bylaws must allow for employees to serve as board members.
- Employees should have no conflicts of interest that impact their decision-making.
- Employees must be familiar with the duties of board member positions.
Most importantly, the employee should provide specialized knowledge or experience to contribute to board decisions.
OnBoard Powers Effective Boards
Serving as a board member is an important and time-consuming responsibility, which can make it challenging for an employee to effectively perform both roles. OnBoard’s all-in-one board management software simplifies manual tasks and streamlines board governance for employee-board members.
From the easy agenda builder to real-time meeting analytics and seamless voting and approvals, OnBoard provides the core features for a board of directors to execute all responsibilities with precision and efficiency.
Download OnBoard’s free board meeting minutes template for an example of how the best boards write their minutes to accurately and legally reflect what occurred during the board meeting.
About The Author
- Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.
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