Board of Trustees vs. Board of Directors: What's the Difference?

By Indeed Editorial Team

Updated November 22, 2022

Published March 29, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

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A board is the group of professionals that a company or organization chooses to govern its business. Two common types that make key organizational decisions are a board of trustees and a board of directors. Knowing the difference between a board of trustees and a board of directors could help you better understand how different organizations make important strategic decisions.

In this article, we discuss boards of trustees and boards of directors, define what both groups do, compare the similarities and differences between a board of trustees versus a board of directors and address frequently asked questions about boards.

What is the board of trustees?

A board of trustees is a group of appointed representatives who preside over a nonprofit organization, private business or charitable foundation to help uphold the relationship between the nonprofit and its donors. The professionals who make up a board of trustees usually have other careers and often provide their advisement for free.

They manage the organization's assets and ensure it handles its funds wisely. Organizations often form their boards of trustees according to local regulations governing nonprofit organizations and trusts in their area. You might find trustees leading health care, education or arts and culture organizations.

Related: What Is a Board of Trustees and Its Responsibilities?

What does a board of trustees do?

The primary duties of the board of trustees include:

  • Motivating the nonprofit to reach its goals

  • Ensuring that the organization is adhering to laws and strong ethical standards

  • Developing the organization's reputation

  • Acting as a liaison between the organization's leadership and donors

  • Assisting in strategic planning

Related: How To Become a Board Member of a Nonprofit: 5 Steps

What is the board of directors?

A board of directors is a group of appointed individuals whose primary responsibility is to hire chief executive officers (CEOs) or executive directors for a business. Regulations require public companies to have board directors participate in major stock exchanges. These individuals regularly review the performance of the professional they chose to lead the company and can re-vote for a new CEO if needed.

The board of directors also monitors the company's financial status and represents the interests of the company's investors. They have a fiduciary duty to the company, meaning they vow to make decisions in the organization's best interest to improve its standings and best serve all interested parties.

Read more: What Is a Board of Directors? (Functions, Types and Roles)

What does a board of directors do?

These individuals' primary duties may include:

  • Designing policies

  • Proposing company goals

  • Meeting with managers, investors and CEOs

  • Reviewing company performance

  • Strategizing to protect and grow the company's assets

  • Upholding ethical business practices within the company

Read more: 12 Important Board of Directors Functions

Differences between a board of directors and board of trustees

While a board of trustees and a board of directors often operate under similar principles and practices, they are very different groups. Here is a list of some of their key differences:

Business type

One of the fundamental differences between these two boards is that a board of trustees presides over a nonprofit organization or private group. For example, they might oversee a hospital or charity. In comparison, a board of directors typically works with a public corporation or company.

Related: Public vs. Private Companies: What's the Difference?

Salary

While they are both appointed positions, members serving on a board of trustees are often volunteer workers. Companies usually pay people who serve on their corporation's board of directors, especially if they're from outside the company. Internal employees who fulfill roles on a board may do so unpaid.

Participation

These groups can share similar primary duties, but a key distinction is the level of participation within the organization or company they serve. Members of a board of directors can make decisions for the company, particularly regarding leadership. Professionals who work on a board of trustees are advisers but rarely actively work in the organization. This means they may be more distant from the organization's daily operations.

Related: Leveraging Strategic Decision-Making To Reach Your Company's Goals

Contacts

Both a board of directors and a board of trustees act as liaisons between the organization they serve and a third party. The third party they are in contact with differs, though. For example, trustees meet with members of the public and donors to understand their perspectives and goals for the organization, while directors often represent the interests of investors.

Related: Effective Reputation Management

Ownership

Individuals on a board of directors often partially own the company they serve. This is rarely true for members of a board of trustees. They simply govern the organization and its use of funds.

Related: What Being Offered Equity in a Company Really Means

Focus

Members of a board of directors aim to maximize company profits and protect the interests of its supporters. Because of this, they often oversee the company's financial decisions and have the power to change unprofitable practices.

Though a board of trustees can also advise an organization on financial decisions, their focus is on its mission and use of assets. This means that they prioritize achieving goals and developing the most effective and productive practices rather than making a profit.

RelatedEconomic Profit vs. Accounting Profit: Definitions, Formulas and Examples

Similarities between a board of trustees and a board of directors

A board of trustees and a board of directors have different roles in the organizations and companies they serve but can still share similar duties. For example, both boards act as advisers to a company. They each monitor the practices and financial decisions of the organizations they serve in order to ensure that goals and ethical standards are being achieved. Here are some other key similarities between these groups:

Size

Though it can vary, the number of professionals working in these groups is usually similar. Many boards of larger organizations or companies have 10 to 30 members. In comparison, smaller organizations can have as few as three professionals on a board.

Related: How To Get on a Board of Directors

Relationship with the public

Both a board of directors and a board of trustees may consider the public opinion of their company or organization. Since they aim to protect and improve the company's reputation, it's important to stay aware of any market news. They may monitor the public's reaction to business practices or liaise between the public and the company leaders.

Appointed positions

Members of the public, company employees or existing board members often appoint or nominate professionals to fill roles as directors or trustees. Sometimes, the existing board members can vote to bring in new members as well. Since these positions rely on appointment or vote rather than a standard hiring process, various career paths lead to serving on a board of trustees or directors.

Related: 35 Interview Questions for Board of Directors

Frequently asked questions

What are the positions on a board of trustees or directors?

Boards of trustees and boards of directors often have the same titles and roles to fill. The role a professional fills on a board can affect their seniority and influence on the board. Here's a list of some positions present on both boards:

  • Chairperson: A chairperson is usually the highest-ranking member of the board. They lead the board meetings.

  • Vice chairperson: This professional serves as the chairperson's second in command. If the head chairperson retires or vacates their position, the vice-chairperson often assumes their duties.

  • Secretary: The secretary of the board contacts the other board members to schedule meetings. They also take notes during meetings when necessary.

  • Treasurer: The board's treasurer handles the company's or organization's financial records. Treasurers also often present their research on business practices to the group.

  • General board member: General board members are trustees or directors without a specific group role. They offer their input and help make decisions.

Read more: Five Board of Director Positions You Can Pursue

What types of companies have a board of trustees?

A board of trustees typically serves a nonprofit or private organization. Examples of organizations that may have a board of trustees include:

  • Educational institutions

  • Trusts

  • Charities

  • Museums

  • Cultural and artistic institutions

  • Mutual savings banks

  • Hospitals

  • Local government groups

  • Religious institutions

Related: The 5 Main Types of Nonprofits (Plus Important FAQs)

What types of companies have a board of directors?

What types of companies have a board of directors? Most for-profit companies have a board of directors. It's especially vital for publicly traded companies to appoint directors. These advisory groups are present in nearly every industry.


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