How Do Boards Differ?

If you are interested in becoming a professional board member, first understand how boards differ. Corporate, advisory, non-for-profit, start-up, board of trustees. Yes, there are many different types of boards. Every company may want to create several existing types or even a new variation of a board if that serves its business goals. So, let’s discuss three major types of boards. 

A High League 

If you have enough time, expertise, great soft skills, understanding of the corporate world, and willing to work hard to help a company grow and prosper, you may be a great candidate for a corporate board seat.

 What is the corporate board’s role? Boards of directors have many responsibilities but the two major duties are:

1) Represent shareholders’ interest to ensure that the company is properly managed by the executive team.

2) Collaborate with the executive team in developing company strategy. 

What companies have this board?  All public companies like Google, Amazon, L’Oréal Group and Whole Foods, to name a few, have corporate boards. C corporations have to establish a board of directors according to regulatory requirements. Other company types (like an LLC) may decide to form a board too.

What else should I know?  A corporate board is a big deal. Board directors are expected to have solid understanding of the company’s business model and ecosystem it operates in. Understanding corporate structure and strategy, financial data and what constitutes enterprise risk management is all equally important. To succeed on a board, directors need great interpersonal and teamwork skills as they constantly communicate with managers and shareholders, and collaborate with each other.

Corporate board directors need to schedule two to 18 hours a month to serve on boards and expect to be remunerated for their services. Directors are typically offered a mixed compensation package comprising of cash and equity components.

 While being in a high league may sound very alluring, you should also note that this prestigious title comes with a lot of hard work and legal responsibility. You will be granted a voting power and will be held accountable for the board’s decisions.   

 Sage Advisors 

You have deep expertise in a particular area and want to share your knowledge to help a company make better decisions.  You may not choose to be on a corporate board of directors, but still would like to belong and contribute your special skills or knowledge to the company. If that sounds like you, then you may consider joining an advisory board. 

What is the advisory board’s role?  An advisory board is less rigid in structure and practice then its corporate peer but can bring a tremendous value to an organization that decides to create one. Two main purposes of forming a board of advisors are to:

1) Create a group of experts that will provide exclusive knowledge-based insights;

 2) Have a body that will consult the management team or the founder without necessarily having to vote on decisions. 

What companies have this board?  Examples of non-for-profit advisory boards that serve the first purpose are the National Cancer Institute and Protiviti. While some companies have both corporate and advisory boards, others, like Google, prefer to have advisors within their board of directors.

Another rapidly growing trend is a startup advisory board. Launching and growing a business is a very difficult task and many startups form an advisory board of seasoned experts to gain access to their rich experience and contacts. On the other spectrum, a startup is too risky of an enterprise and some board members would prefer to join an advisory board rather than a corporate board to minimize legal responsibility.

What else should I know? While personal interaction in advisory boards is usually less often than in corporate boards, being strong at collaboration, listening and teamwork is a must. You are expected to be a subject matter expert in a particular field(s). Advisory board membership may require less time commitment than corporate boards. However, I would still advise booking one to six hours a month for your board service.

Similar to corporate boards, a compensation package may have any combination of cash and equity. It is not uncommon to see some advisory directors to serve on boards for free or on a pro bono basis.

The board of advisors offer its good counsel to the management team, but have no legal liability; hence, participation is a much smaller risk. The CEO can act or not act as he or she wishes.

Supportive Trustees 

You want to join a non-for-profit organization or a public initiative that you deeply support and care about. You share their mission aims and are willing to contribute knowledge and social capital to help the NPO succeed at its goals. If that describes you, then you may be a good fit for a board of trustees.

What is the board of trustee’s role?  A Board of trustees is created to:

1) Play almost the same role as a corporate board but for a non-for-profit world, and

2) Compile a group of individuals who sponsor and support an NPO’s mission and activity. 

What organizations have this board? Many educational institutions like UVA Darden Business School (my Alma mater) as well as other type of NPOs, like Mayo Clinic have well established boards of trustees.  

What else should I know? Board of trustees’ membership very often is a volunteer position. Although large organizations remunerate their permanent board members and cover travel expenses, most NPOs and public initiatives do not offer any compensation for board service. Why would you be interested to serve, then? Because you care about the cause and want to give back. Other benefits include gaining board experience and networking with fellow members and industry leaders.

While board of trustee’s members may not meet as often as corporate board directors, you are expected to commit time and effort to make things happen. Depending on the nature of the board and organization you join, membership will take anywhere from one to ten hours a month. As with other types of boards, understanding the fundamentals of governance and the field of operation are the necessary skills to possess.

Assess your interests, skills and availability to decide which board to pursue. And, remember that regardless of the type of board you join, Board of Pros will be a source of valuable information to guide you through your board journey.