Board Meeting Tips

Board of Directors Vs Board of Trustees

Today there are different kinds of boards with their functionality. In this article, we are going to compare the Board of Directors vs the Board of Trustees.

Basic tools for corporate management

The corporate governance system is an organizational model through which the company represents and protects the interests of its investors. This system includes many things: from the board of directors to the schemes of remuneration of the executive branch and mechanisms for declaring bankruptcy. The type of model used depends on the structure of the corporation that exists within a market economy and reflects the very fact of the separation of functions of ownership and management of a modern corporation.

The interests of shareholders and management in corporate structure do not always coincide. Corporate law resolves this conflict by forming an additional link – the Board of Directors. It is elected by the shareholders and acts as their representative, the representative of their interests in the corporation.

What are the functions of the Board of Directors?

The Board of Directors is a management body elected for a specified period by a meeting of shareholders, which manages the activities of a joint-stock company in the period between annual meetings of shareholders in accordance with its competence provided to the Board of Directors by law and by the charter.

The board of Directors performs the following functions:

  • overseeing the procedures for election and re-election of members of the Board of Directors and management, evaluation of their activities;
  • evaluation of the company’s strategy;
  • assessment of the company’s financial performance and distribution of its funds;
  • ensuring the availability of sufficient financial resources;
  • approval of annual budgets;
  • reporting to stakeholders for the results of the organization’s activities;
  • accounting of the organization’s activities in accordance with the rate;
  • ensuring compliance of the company’s activities with the law.

What is the Board of Trustees?

The Board of Trustees is responsible for providing governance and oversight of the company and for identifying, deliberating, and acting upon matters of strategic importance to the company’s well-being and successful achievement of its mission and goals. This board takes care of institutions and deals with raising additional funds and resources for the implementation of activities.

The Board of Trustees has the following tasks:

  • the introduction of innovative practices, the development of social services in the institution, the improvement of the conduct of medical and recreational, cultural, mass, social, and labor rehabilitation;
  • assistance in attracting non-budgetary funds to strengthen the material and technical base of the institution (improvement of premises and territory, construction and repair of social, household, educational and other purposes, purchase of equipment, inventory, technical means);
  • assistance in the organization of contests, competitions, and other mass events aimed at preventing crime by elderly citizens and disabled people;
  • establishing links with social partners, employers, employment services, public authorities, local governments, the media, other organizations and individuals interested in the development of the institution;

How do these boards differ?

Comparing Board of Directors vs Board of Trustees, it should be noted, that these boards have different directions. The Board of Directors helps companies grow and develop at the pace that business needs – without slackening momentum and capacity. Moreover, the Board of Directors and corporate governance also solve the owner’s own problems – it helps him to minimize his presence in operational management.

Meanwhile, members of the Board of Trustees carry out their functions on a gratuitous basis and are separated from the main labor, production, and service activities.