Q&A: Do Board Members Get Paid?
Sitting on the board of directors at an organization requires significant experience. These individuals are responsible for making strategic and financial decisions regarding an organization's future. Serving as a board member does not represent a full-time position, so if you have an interest in this role, you need to understand how its compensation differs from a typical job. In this article, we discuss board members' compensation and provide steps you can take to gain a board position.
What is a board member?
A board member is an individual elected by shareholders to serve on an organization's board of directors. This board can consist of both inside and outside members. An inside board member refers to an internal member of the company, such as an employee or officer. Meanwhile, an outside board member is someone who is not an internal employee or stakeholder.
The board of directors is responsible for making decisions regarding the direction of the organization. Members aim to work in the organization's best interest and protect shareholders' assets, ensuring they receive good returns on their investment. To carry out this task, members meet regularly to discuss the organization's performance and develop strategies or policies.
Related: The Role of the Board of Directors
How do board members get paid?
The average salary for a board member is $38,818 per year, and the average salary of a board of directors is $67,073 per year. Board members typically do not receive an hourly salary. Instead, they may get a base retainer fee for their services as a member. In addition to a retainer, some of the compensation options offered to board members include:
Stock options: When offering stock options, the organization gives board members the right to buy and sell a particular number of shares in its stocks at a specific price rather than market value. The board members are not required to utilize their stock options, though the organization sets a predetermined deadline for purchasing and exercising them.
Stock grants: When an organization provides stock grants to board members, it gives them a specific number of shares in its stock at no cost. That ownership may occur at a predetermined timeframe, such as three years. If the board member leaves before the three-year mark, they lose their stock in the organization.
Reimbursements: Board members often receive reimbursement for the costs incurred for traveling to board meetings or retreats. For example, they get compensated for airfare and hotel or other lodging reservations. Some receive a per-diem rate, which provides them a daily allowance for travel-related expenses, including meals.
Liability insurance: Due to the role's responsibilities, an organization may provide liability insurance as part of board members' and directors' compensation. Members are expected to make decisions in the organization's and stakeholders' best interest while complying with relevant regulations. This insurance helps protect them from lawsuits alleging improper actions or wrongdoing.
Meeting fees: Some organizations pay members compensation on top of their cash retainer for their attendance at board meetings.
What factors affect board members' pay?
The compensation that a board member receives can vary on numerous factors. Some examples include:
Size of the organization: A smaller company or start-up may offer stock options as compensation because it has growth potential. If it ends up gaining significant success, it could result in large payouts for the holders. Meanwhile, large companies that earn multi-million-dollar revenues may offer cash compensation to board members.
Whether the organization is public or private: Private organizations often do not compensate board members with equity. Instead, they may rely on paying them via cash retainers and meeting fees. However, a public organization can provide additional compensation in the form of equity by offering them shares in the organization.
Type of organization: For-profit organizations typically offer some form of monetary compensation to their board members. However, individuals who serve on the board of a non-profit organization often perform this role on a volunteer basis. They typically do not receive salaries but may get reimbursement benefits for travel.
Industry: Because there are no specific compensation requirements, payment can vary widely amongst industries. These differences may occur due to varying industry standards or averages and responsibilities associated with the role.
Members' employment status: Outside board members, or individuals external to the organization, receive compensation for serving on the board. Meanwhile, inside board members, or individuals otherwise employed by the organization, do not receive additional compensation for their board role.
Number of meetings: If an organization decides to pay its board members for their attendance at meetings, their payment will vary on how many meetings are held.
How to become a board member
Becoming a board member can be difficult, but there are some steps you can take to help you pursue this goal. These steps include:
1. Determine your preferred board type
Take time to think about the type of board you would like to serve on, along with the role you would like to perform. Identifying your current skills and interests can help give you an idea of the type of organization that best suits you. You can also think about your career goals and what you would like to gain from serving as a board member.
You can choose whether you would prefer serving on the board of a nonprofit or for-profit organization based on your interests, experiences and skills. The difficulty of gaining a board position may also be a factor, as it is typically easier to gain a seat at nonprofits. A nonprofit seat can serve as a good starting point to gain experience before seeking a corporate board role.
2. Identify and develop your professional skills
Next, examine your existing skills and experiences more closely. Boards look for members with expert knowledge in a particular area, so try to determine your niche. You can also research what skills are in-demand in your industry or by specific companies. For example, many boards appreciate members with strong financial knowledge, and the areas of social media, digital transformation, cybersecurity and data are growing in interest.
Once you identify your niche, highlight it on your resume and make an effort to continue developing and using those skills. If you do not have existing board experience, find opportunities to interact with your current company's board or serve on a local or community board. You want to demonstrate you have significant and relevant experience when meeting with board members and applying for opportunities.
3. Research companies and board members
You can find websites that publish board openings, similar to job boards. You can also reach out to specific companies directly or your contacts to inquire about potential opportunities. Companies posting board openings online will outline the types of candidates and credentials they desire, which will help you assess whether an opportunity is right for you.
If you are looking at a public company or organization that has not posted an opening, you can still research its current board members to assess your fit. You can learn whether it already has members within your niche or a knowledge gap that you could fill. You may also discover whether any members seem close to retirement, which could provide an opening soon. This research also offers networking insights.
4. Start networking
One of the most effective methods of gaining a board position is to utilize your professional network. If you already belong to an organization, connect with its board members and ask about their experience gaining board membership. They can provide helpful, specific advice, and you can demonstrate your interest in a board seat. Try to also reach out to your existing professional contacts, especially those who serve on boards, to gain more insights and learn about potential openings.
To build your professional network, join associations relevant to your industry or profession. There are also groups aimed at board membership that host public events, such as the National Association of Corporate Directors. These groups serve as a great way to make new and potentially powerful connections. While networking, make sure to relay your interest in finding a board seat and include specific details about the type of position you seek and the skills or experiences you can offer.
5. Demonstrate your value
Whether you gain an interview for a board member position via an online posting or networking, you need to demonstrate why you deserve the opportunity. Show your interest in the specific board by researching the company, its board members and the industry. If you can display how your existing skills and experiences align with the organization's values and mission, it can help impress its board members. You could be making decisions regarding its future, so this alignment is necessary to assure stakeholders that you will keep their best interests in mind.
If you identified a gap that you can fill, focus your discussions on those relevant skills or knowledge. For example, if the board wants to boost its cybersecurity efforts, you can demonstrate your prior experience implementing cybersecurity strategies for an employer and the ensuing positive results. Identifying the unique skills you could provide serves as an effective method of differentiating yourself from other candidates or existing board members and demonstrates your value.
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