According to the Center for Association Leadership, more than 80 percent of companies paid money to members of their board of directors for their services. Members of the board of directors and company employees serve different roles within the organization. Board members are not employees and companies need to recognize the difference between the role of the directors and the role of employees.
Role Of Board Of Directors
The board of directors consists of a team of individuals who oversee the actions and decision making of the company. The board of directors recruits and hires the chief executive officer and allows her to manage the company. The chief executive officer reports regularly to the board with the operational results of the company. The board evaluates the chief executive officer’s actions and decides when to terminate the relationship. Board members may provide services for the company, but reserve the right to participate in board decision making.
With many companies providing compensation to board members, the company needs to understand the difference between compensating board members and compensating employees. Businesses provide compensation to board members as a way of attracting the most qualified individuals to make company decisions. Compensation also provides an incentive for board members to perform at their best. Board members receiving compensation attend board meetings and contribute more frequently.
Role Of Employees
Employees provide their services for companies. These services include manufacturing products, meeting with customers and filling administrative roles in the organization. Compensation forms the basis for any relationship between the employee and the company. Companies provide compensation to their employees in exchange for their service, consisting of both wages and benefits, such as health insurance or a retirement plan.
Directors Versus Employees
Several key differences exist between the role of directors and employees. Directors and employees fill different roles within the company. Directors provide oversight, while employees perform the work being overseen. The employees report to supervisors or managers who report up the chain of command to the chief executive officer. The chief executive officer reports to the board of directors. Employees provide their service in order to maintain their relationship with the company. The directors maintain their relationship throughout their term on the board.