A board of directors and board of trustees may sound quite similar — and they’re sometimes used interchangeably. However, they’re not intended to function the same way and often have different responsibilities.
Knowing which type of board is the best fit for your organization ensures senior leaders take on the right responsibilities. This blog provides an overview of the most significant differences between a board of directors and a board of trustees.
What Is a Board of Directors?
A board of directors is a group of individuals — either elected or appointed — who represent the shareholders and stakeholders of a company or organization. It acts as a governing board responsible for making key decisions and providing strategic guidance to ensure the organization’s sustainability and longevity.
Roles and Responsibilities
The primary responsibilities of a board of directors include providing financial oversight, making strategic decisions, and ensuring the effective management of a business.
The board typically sets the company’s overall direction, approves major policies, establishes board term limits, and hires and evaluates top executives, such as the CEO. The specific roles and responsibilities of board member positions can vary depending on the type of organization, its size, and its governance structure. Classified boards, for instance, differ from traditional boards.
Pay and Notoriety
Members of a board of directors are usually compensated for their service, although the compensation can vary widely, including cash retainers, stock options, bonuses, and expense reimbursements. Board compensation is designed to attract and retain qualified individuals who can provide valuable guidance and oversight to the organization.
The average board member salary in the United States is $75,713, as of August 27, 2023.
What Is a Board of Trustees?
A board of trustees functions similar to a board of directors, but is usually responsible for overseeing a nonprofit, educational institution, or religious organization instead of a business.
Roles and Responsibilities
A board of trustees may fill similar roles to those of a board of directors, but there are a few areas where their responsibilities differ.
Boards of trustees play a crucial role in setting the long-term strategic direction of the organization. They help define the organization’s mission and vision and develop strategic goals and plans to achieve them.
A board of trustees is also responsible for establishing and upholding the organization’s governance policies and practices. This includes creating and amending bylaws, ensuring compliance with relevant laws and regulations, and maintaining ethical standards.
Additional duties include providing fiduciary responsibility, public relations, risk management, and hiring of leadership.
Pay and Notoriety
Members of a board of trustees can be compensated, but whether they receive compensation and the extent of that compensation varies widely depending on the type of organization and its specific policies.
Members of a board of trustees often volunteer their time instead of taking a salary. However, some receive a salary, or other forms of compensation like reimbursements or stipends.
OnBoard Powers Effective Boards
Modern boards increasingly leverage board meeting software to streamline board operations and enhance collaboration. Board management software serves as a central hub for board-related communications and gives board directors a secure source of truth for everything they need to be effective in their roles.
With OnBoard, boards can simplify meeting management, collaborate securely, access meeting materials in real time, and ensure compliance with governance standards. The software is purpose-built to address real-world needs and reduce complexity so boards and leadership teams can work smarter, move faster, and achieve more for the organizations they govern.
Download our Board Meeting Minutes Template to see how OnBoard simplifies board governance.
About The Author
- Andrew Sompels is an implementation consultant at OnBoard who specializes in helping higher education boards get the most from their board meetings. With degrees from Michigan State University and Columbia College (Chicago), Andrew's favorite part of the job is setting up customers for success. He once worked on TV shows such as Cutthroat Kitchen and Food Network Stars. Andrew lives in Noblesville, Indiana, with his wife, two children, and their dog.