Board of Trustees vs. the Board of Directors: What Are the Differences?
The roles of the board of trustees vs. board of directors are similar, making it common for people to use the terms interchangeably. While both positions have a strong role in governance, distinct differences set them apart. Regardless of the title, the roles and responsibilities for both positions are outlined in the bylaws.
Today, good governance is in the spotlight in every type of business and organization. Board management software is the best way for boards to fulfill their fiduciary duties and remain responsible stewards and leaders.
What Is a Board of Trustees?
A board of trustees is a group appointed to preside over a nonprofit, charitable foundation or business. Trustees are usually not paid for their duties, but they sometimes are. They usually have or formerly had other careers and are happy to provide their expertise to a charitable organization.
The most common types of organizations that would use trustees are:
- Nonprofit organizations
- Local governments
Trustees are not allowed to engage in self-dealing, which means they may not engage in transactions that benefit them.
What Does a Board of Trustees Do?
A charitable trust is a trust that distributes its assets to a charity. The role of the trustees is to oversee a charitable trust.
Trustees are held to a higher fiduciary standard than other board directors. Their primary duty is to the beneficiaries of a trust. This is an important distinction because trustees may be held personally liable for simple acts of negligence even if they made decisions in good faith.
Something that separates trustees from board directors is they must abide by charitable trust laws. Some states have charitable trust acts, and these regulations differ substantially from the laws that govern nonprofits.
Trustees are generally responsible for the following duties:
- Participating in fundraising
- Giving an annual donation
- Maintaining donor loyalty
- Supporting the community
- Representing stakeholders
- Serving as ambassadors for the nonprofit
- Assisting in annual strategic planning
- Upholding the organization’s reputation
What Is a Board of Directors?
The term “board of directors” is connected with public companies, private companies or nonprofit organizations. Board directors may either be appointed or elected. It is common for board directors of corporations to be paid for their time, yet nonprofit board directors are nearly always volunteers.
What Does a Board of Directors Do?
Board members have fiduciary duties to hold them accountable for sound governance. They represent the best interests of the shareholders and stakeholders at all times.
Some of the common duties of a board director include:
- Recruiting and hiring the CEO or executive director
- Monitoring the CEO or executive director, providing performance evaluations, and firing them if necessary
- Supporting the executive director in their duties
- Establishing policies
- Strategizing and setting goals
- Assisting in building brand recognition
- Giving an annual donation
- Upholding ethical business practices
What Are the Differences Between the Board of Directors and the Board of Trustees?
While a board of directors and a board of trustees share some similar duties and responsibilities, there are a fair number of differences between them. The difference between the board of directors and the board of trustees are as follows:
- A board of trustees presides over a private business, nonprofit organization or charitable foundation, whereas a board of directors may preside over a public corporation, private business or nonprofit.
- A board of trustees serves as a volunteer, whereas a board of directors may be paid if they serve on a corporate board.
- A board of trustees primarily operates in an advisory capacity leaving decision-making to the senior leadership, whereas a board of directors is responsible for decision-making.
- A board of trustees engages with donors and members of the public, whereas a board of directors for a corporation or nonprofit represents the interests of investors and stakeholders.
- A board of trustees does not have a financial interest in the organization they serve, whereas a board of directors may own stock in a company that is not a nonprofit.
- A board of trustees advises senior leadership on financial matters. Yet, their primary role is upholding the mission and overseeing assets, whereas a board of directors oversees an organization’s financial decisions and aims to maximize profits.
Board of Trustees vs. Board of Directors
|Board of Trustees||Board of Directors|
|Type of Organization||Private business, nonprofit organization or charitable foundation||Public corporation, private business or nonprofit|
|Primary Role||Upholding mission and overseeing assets||Overseeing financial operations and maximizing profit|
|Compensation||Serve on a volunteer basis||May be paid|
|Scope||Operates in an advisory capacity||Directly responsible for decision-making|
|Function||Engages with donors and members of the public||Defends the interests of stakeholders and investors|
|Financial Interest||No financial affiliation||May hold stock in organization they’re representing|
Board Management Software Is an Important Tool for Board Trustees and Directors
In addition to performing as effectively as possible, board directors and trustees owe it to their shareholders and stakeholders to work as efficiently as possible. The best way to do that is to take a modern approach to board management by digitizing their duties as much as possible.
Digital tools such as a highly-secure board management solution make it possible to cut down the hours required to create board books and agendas, find documents, take meeting minutes, and much more. Last-minute changes for agendas and board books can quickly be made electronically.
With a board management system, automatic notifications ensure that trustees and board members will be held accountable for completing tasks assigned to them.
Trustees and board members can access board information using an electronic device anywhere in the world.
Frequently Asked Questions (FAQs)
Can the board of directors be called the board of trustees?
No, the two terms are not intended to be interchangeable because of the distinct differences in the roles.
What is the head of a board of trustees called?
The head of a board of trustees is called the chairperson.
Who are the members of a board of trustees?
Members of a board of trustees may be community leaders, businesspeople in the community, alumni of a university, religious leaders or other prominent leaders who can offer diverse perspectives.
What positions are there on a board of trustees?
The positions on a board of trustees include:
- General trustee or general board member