Board of Trustees

What is board of trustees?

A board of trustees is a set of people who are elected or appointed to oversee the functioning of a specific firm. This is usually a firm's governing body, and its priority is to make sure that all management decisions are being made in the best interests of stakeholders. They are also the individuals who make financial decisions and set regulations on behalf of a non-profit organisation.

A board of trustees could play an essential role in a corporation's failure and success, depending on how they manage their functions and responsibilities.

It usually consists of significant members of the corporation’s management team. Others could be elected or appointed depending on their experience and knowledge in the organisation's management areas. In addition, external and internal trustees are frequently seen on boards.

Furthermore, a board of trustees is comparable to a board of directors and can operate in the same way in certain corporations. However, it is most usually found in private entities. For example, associations, mutual savings banks, university endowments, art museums, and universities are linked with trustees' boards.

Frequently Asked Questions (FAQs)

What is the definition of a board?

A board of directors is a group of experts chosen by a corporation to oversee its operations. Trustees or directors are frequently found on boards.

Based on constitutions or legal form of the corporation, the board could be referred to as the board of trustees, board of directors, governing body, committee, council, management committee, or any other term. Trustees, board members, non-executive directors, directors, and committee members are used to define those who serve on the board.

Furthermore, the board's objectives and obligations and its restraints would differ amongst organisations, based on the provisions of the firm's constitution. A board's primary goal is to give strategic direction to a company.

A successful board is engaged in the organisation's work and leads it. The board is also in charge of its finances and bears legal accountability for its ventures and activities. The chief executive officer (CEO) or the equivalent is the board's primary point of contact with the organisation.

What are the trustees' roles and responsibilities?

In the corporation, both board trustees and directors have specific roles and responsibilities. On the other hand, trustees are held to a higher level than board directors by state trust law. For instance, directors are generally only held liable for willful wrongdoing or gross carelessness personally. In contrast, a trustee may be held liable for simple negligence, even if the decision had been made in good faith. Furthermore, a trustee may be held personally liable for a bad investment choice, but a director is merely liable for a risky investment.

All board members have fiduciary obligations, which include the obligations of obedience, loyalty, and care. These responsibilities imply that a person must prioritise the organisation before personal gain, be cautious while making business decisions and follow the non-profit's objective. Furthermore, trustees are held to a higher standard of care in general.

Furthermore, each director must inform the non-profit board if the decision would favour the director personally. Any self-dealing by the trustee is typically forbidden.

The board of trustees has the following key responsibilities:

• Serves as a link between donors and the firm's leadership.
• Encouraging the non-profit to fulfill its objectives.
• Contribute to strategic planning.
• Make sure that all corporations follow all applicable laws and adhere to high ethical standards.

What is the function of trustees in non-profit organisation? 

In the case of a non-profit organisation, the function of a board of trustees is comparable to a board of directors. The board of trustees, like a board of directors, is liable for overseeing the non-profit initiative, strategic planning, fundraising, and policymaking.

Moreover, some trusts and foundations exist solely to administer money to transfer it to other charitable organisations and do not engage with the day-to-day activities of a non-profit organisation. In such circumstances, the trustee's duty would be restricted to asset management and determining how money should be allocated.

Trustees also have the additional responsibility of asset management. Managing taxes, obtaining charitable donations, making investment decisions, and allocating assets to one or more recipients in compliance with the trust's guidelines are all instances of this.

What is the procedure for forming a board of trustees? 

Every entity chooses to constitute a board of trustees and incorporates certain provisions and procedures in its bylaws. The establishment of the endowment, foundation, or trust must precede the foundation of a board of trustees.

The board's structure is regulated by state legislation, articles of organisation, the non-profit's bylaws, and the provisions of legal instrument or trust. For example, the minimal number of trustees could be mandated by state legislation and what board positions, like treasurer, secretary, or chair, should be filled. The size of the board, how persons are appointed, and the length of the tenure may all be determined by the trust rules and bylaws.

Furthermore, the same criteria that apply to creating a board of directors should apply to the establishment of a board of trustees. Organisations prefer to pick board members committed to a specific company objective and have a wide variety of backgrounds. The organisation must also consider whether the person has the relevant legal or financial experience and background because of the extra responsibilities in asset management and fiduciary responsibilities.

Trustees aren't normally paid for their services, but the payment mechanism should be spelled out in the bylaws if they are. All the board of trustees' policies should be in complete accordance with state rules regulating organisations.