First, management, major holder of stock and major investors are not paid for board service. Outside board members and small investors (angels) in small companies are paid in options not cash, usually 1% of the fully-diluted shares, at the current option price vesting over 2-3 years and only increased if at the end of that time there has been significant dilution. Larger companies – still private – often pay $1,000 a month or $3,000 a meeting plus options. Public companies carry much more obligation and risk and pay anywhere up to $60,000 a year to a board member plus more for committee chairmanships. But usually those spots are recruited by professional recruiters and very competitive. Hope this helps.
-Dave

Arthur,

All good points. Not having the CEO on the Board is a non-starter for most companies. CEO’s often represent or hold a significant number and percentage of common shares. A nominee who is not directly in the senior management team would be unacceptable too. Far too much knowledge of operations and strategic plans would be lost without that voice. But balance on the board is of utmost importance. Investors must never control the board, no matter how many rounds. Outside experts who are neutral are importance to keep balance. For earlier stage companies a board of five seems right, with two from common including the CEO, two at maximum from the investor classes and one selected by unanimous consent by the other four.

Dave

As the Directors of a company are responsibile for judging the performance of the CEO, should the CEO be on the Board of Directors? The question is the same regardless of the amount of shares held. The CEO can nominate an individual to serve as a Director, but the obligation of a Director is to serve, without preference, all of the shareholders of the company. The CEO and other senior executives may be invited to attend all but executive session of the Board.

From an investor protection perspective, Boards of Directors are weakened if company executives are members.