When you form a corporation, you must appoint a board of directors. Though their size and makeup differ from company to company, every corporation has must have one. Unfortunately, there are no hard and fast rules about structuring a board of directors, a fact that leaves many new business owners uncertain about exactly how to organize their upper management.
Difference Between a Director & Officer and Their Roles
What is an officer?
Officers are executive leaders hired to oversee the daily operations or an organization. They function as managers for departments and department leaders.
Common officer positions within a corporation:
What is a director?
A director is a company leader selected by and accountable to shareholders. Directors are responsible for the financial well-being of an organization. They help shape a company by appointing officers to run the daily operations while the directors manage the long-term vision and strategic investments for an organization. They act in the interest of shareholders and communicate with officers to gain insight on how a company functions. Directors are also responsible for setting policies for an organization including product pricing, employee wages and monetary investments.
Companies hire a specific number of directors that make up a board, each with specific roles. Generally, a board consists of three types of directors:
Director vs. officer education
While there is no specific degree program required for either a director or an officer, both positions are usually filled by professionals with some level of educational experience. CEOs often come from a background in business studies. Large corporations may look for individuals with an MBA before choosing someone to move forward in the hiring process. Since a director may fill a place on the board in a different industry than their professional expertise, these positions can be based more on experience within the workplace than a formal education within a certain field.
Director vs. officer salary
Directors work in a supervisory role governing the general outlook of the company so their wage differs from the pay provided for officers responsible for the daily operational management of an organization. While a CEO earns a salary with benefits, board members may be compensated in various ways including shares in company stocks, fees for serving a set term on the board and other financial returns.
Director vs. officer in public and private companies
In public companies, directors are guided by governmental rules and regulations. The board of directors must follow certain guidelines from the Securities and Exchange Commission unless an organization is a non-profit or privately run corporation. However, some private businesses or not-for-profit groups still choose to use the structure of directors who govern the organization and officers who oversee daily operations.
In public and private companies, officers reflect needs of the corporation and function as top-level employees. While public company CEOs undergo scrutiny from the board of directors, they also maintain a level of autonomy to make decisions for the company. In private organizations, the CEO may also function in a director role to oversee more large-scale planning and decision-making for the business. In public companies, the CEO is expected to function independently from the chairman of the board to help maintain a balanced system.
Becoming a director vs. becoming an officer
To earn their job as an officer, many professionals gain years of work experience in their field. After moving up through supervisory positions and taking on more authority, a business professional may earn the role of CEO or chief financial officer within their company or with a different organization in the same industry. Directors are typically appointed to their position by shareholders after serving as an officer or upper-level manager. Like officers, they are sometimes selected from among the staff of an organization or they may be chosen for their professional expertise from a different field.
What is the difference between an officer and a board of directors?
Can officers and directors be the same?
What is a director or officer?
Is a president a director or officer?