Many organizations operate under the direction of a board of directors or governing board. Some types of organizations are legally required to have a board of directors to lead the organization – community health centers are one example, according to the National Association of Community Health Centers. In other cases, the board of directors answers to the shareholders of an organization. Board members are generally not considered employees.
The major role of a board of directors is governance. In community health centers, for example, the board must approve and monitor the annual budget, ensure the organization has an independent financial audit and engage in long-term strategic planning. Governing boards typically supervise the CEO of an organization. Community colleges and schools may have elected board members, while board members in other organizations are approved by the board but not the public. In some cases, board members are paid or receive stock in the organization. In others, they volunteer their time. The Equal Employment Opportunity Commission notes that employees can be hired or fired, must be supervised and must report to someone higher in the organization – none of these are typical for board members.
Whether someone is considered an employee often depends on the context, according to a July 2010 newsletter from the law offices of Liebert, Cassidy and Whitmore, in San Diego, California. Under California law, board members in community colleges, for example, cannot be considered employees because they do not report to anyone, do not have a supervisor and have outside sources of income from their primary place of employment. They may be treated as employees for some purposes, however, such as withholding income taxes when they are paid a stipend.
Benefits and Compensation
One issue for some organizations is whether board members are entitled to employee benefits such as health insurance. In most cases, it depends on how the insurance policy is worded. If an individual must work a certain number of hours per week to be included on the plan, board members would not be eligible for coverage. Regulations may vary from one state to another, and in some states board members would be offered employee benefits as a matter of course. Another may be the issue of compensation. For-profit board members are typically paid, according to the 2020 Women on Boards website, while nonprofit board members are not.
It was common practice for governing boards to include employees, family members and friends. Most boards are required to have independent directors who are not associated with a company or on its management team. It is legal for board members to do paid work for the organization, according to 2020 WOB, but awkward situations can arise when board members fill two roles. The potential for conflicts of interest may also arise. The organization should be sure it is in its best interests to have a person fulfilling two different roles in this fashion.