What Is the Difference Between a Board of Directors & a Board of Trustees?

By Christine Lebednik
Board of directors
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A board of directors and a board of trustees have similar structures and purposes, both conducting oversight and governance activities within an organization. The primary difference is the type of organization in which each board operates.

Shareholder Company

Publicly traded companies
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A board of directors, also called a "directorate," is a governance panel that manages the general business activities of a publicly traded company; that is, a company with shareholders. All publicly traded companies must have a board of directors.

Election

Voting
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Shareholders vote on board of directors membership. Usually this is done through mail by a proxy statement, although shareholders have an option to cast the vote in person at the annual director’s meeting.

Oversight

Board of directors
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The purpose of the board of directors is to handle oversight of the company’s business activities conducted on behalf of the shareholders. This includes deciding when or if to pay out shareholder dividends.

Payment

Board members may receive stock
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Members of the board of directors receive compensation in either cash, stock, or both.

Nonprofit

Board of trustees
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A board of trustees is similar to a board of directors. A board of trustees, however, operates in the context of a nonprofit organization.

Example

A good example, provided at Investorglossary.com, is that of a mutual funds group. The mutual funds group itself, a shareholder entity, has a board of directors; whereas each of the individual funds, as a nonprofit, has a board of trustees.

About the Author

A writer/editor since 1984, Christine Lebednik has spent much of her career in business and technical writing, and editing. Her consumer print and online articles include product descriptions for TDMonthly Online, book reviews for Catholic News Service, consumer reports for Consumer Search and works for various other publications. Lebednik received her Bachelor of Arts in English from Salem State College.