Board of Trustees Vs. Board of Directors

by Robert Rimm; Updated September 26, 2017

Nonprofit organizations, such as charitable, religious and public arts organizations, do not exist to make a profit for the benefit of stockholders or owners. A board of directors, governors or trustees oversees them; for nonprofits, those names represent semantic differences and mean the same thing. For-profit corporations are governed solely by a board of directors responsible for business oversight and maximizing profits.

Ownership

Ownership is one of the the key differences that separate for-profit enterprises and nonprofits. Corporations can be either publicly or privately owned and may allocate profits to employees and stockholders. Their boards of directors nearly always have ownership stakes that align their interests with the other constituents. Nonprofits can have members as well as boards but no direct ownership.

Profits

Boards of directors for public and private corporations have a fiduciary responsibility to the company's owners (shareholders) to make money, grow the company and operate with integrity. Nonprofit boards, while still upholding the fiduciary aspect for the proper use of funds, exist to serve the organizations' mission statements. Their boards still aim to earn money, which must be used for the public good and to sustain themselves rather than for private benefit. Nonprofit boards of trustees and for-profit boards of directors both work with high-level management to maximize their respective goals.

Accountability

The boards of both nonprofit organizations and for-profit businesses remain the public focal point for accountability. This encompasses all major hiring decisions, overseeing the books to ensure compliance with Internal Revenue Service regulations and working toward furthering their respective missions. While nonprofit boards are not permitted to have an ownership stake, they are charged with the same kind of oversight and protection of for-profit corporations.

Duties

The nonprofit board of trustees and for-profit board of directors must adhere to primary responsibilities that, despite often different aims, remain similar. They must supervise management, publicly represent the organization with honesty and clarity, oversee all economic transactions and taxes while ensuring balanced books and ensure that all goals are properly carried out. Other specific duties are typically spelled out in articles of incorporation or a nonprofit charter.

Resources

About the Author

Robert Rimm graduated from the University of Pennsylvania and founded 88keys.com to provide education, writing and communications services for clients within the nonprofit, arts and education communities in the United States, Europe and Russia. His key interests include art and culture, social entrepreneurship, education, the environment and human rights. He is fluent in French and Russian, and is a widely published author.

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