Who Is A Board Of Trustees? How Are They Different From Board Of Directors?
Board of trustees are the members of organizations with managerial powers and responsibilities that affect the stakeholders’ interests.
They have immense responsibilities of managing company funds and using them with the best interests of the stakeholders in mind.
To learn more about the board of trustees, read this article here.
Who Is A Board Of Trustees?
A board of trustees is a board with a particular group of people appointed for the company’s management. These management employees have been involved in managerial positions and have been with the company for a long time. Usually, the board of a company’s trustees includes the friends or family members of the company’s founder.
Not just the friends or the family. The board of trustees members of a company may include people who are internal or external workers. A board of trustees may be small or large based on the company’s size. However, it usually consists of 30 people or so.
The board president might divide the complete board of trustees into subsections and different subcommittees. Making divisions or subsections of the board of trustees allows large entities like banks to segregate power and pay attention to areas that need minute observation.
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What Do The Board Of Trustees Do?
The board of trustees is usually responsible for managing the organization and overseeing the different business processes. They are also a part of necessary decision-making and responsible for the consequences those decisions can bring about.
Here are a few examples of different organizations that can have a board of trustees —
- Banks
- Universities
- Museums
- Nonprofit associations
The bylaws of an organization are responsible for outlining the selection of the board of trustee members.
What Are The Responsibilities Of The Board Of Trustees?
Some of the different responsibilities of the board of trustees include –
Legal Duties
A board of trustees is responsible for the legal duties associated with the organization. They have to adhere to specific duty requirements by law. Here are some of those duties.
Duty of Care
According to the duty of care, the board of trustees has to follow through with all of their duties with the assurance of the well-being of the company stakeholders. Board members need to be careful about their steps and actions as board members. They have to fulfill the duty of care requirements and meet different areas of expectation, such as –
- Attending all meetings.
- Preparing for all meetings
- Reviewing different financial processes daily.
- Make sure that they are enquiring about all areas before making a decision.
- Fulfilling all requirements associated with federal and state needs.
Duty Of Loyalty
The board of trustees has to also maintain and fulfill the duty of loyalty. It is the process of ensuring that all the board members act in the company’s interests and not out of their own. Here are some of the expectations they need to fulfill for duty of loyalty.
- Making sure that there is no conflict of interest.
- Also, it ensures that the other board members are using the company’s resources and opportunities for organizational benefits and not their gains.
- Making sure they maintain confidentiality.
Duty Of Obedience
The board members need to act according to the best interests of the company and its mission. The duty of obedience ensures that board members uphold all the company policies and maintain different company functions. Here are some of the requirements members of the board of trustees need to fulfill their duty of obedience.
- Ensure the maintenance and compliance of all the company standards.
- A thorough examination of all the documents provided by the company.
- Ensuring that all decisions are within the company’s mission and under the law.
Holding Funds
A board of trustees also has to bear the responsibility of holding the organization’s funds in trust. They are capable of using the organization’s funds for the best interests of the organization and the stakeholders.
They can do that in two different ways. I have mentioned them below –
Endowment Of A University
The board of trustees often has to carry the responsibilities of overseeing university endowments. They have to function in a way that aptly uses the university’s endowments with the stakeholders’ best interests in mind. As a board trustee, one usually invests the endowment assets themselves.
In other cases, they can delegate the endowment asset among managers who do it for them. However, eventually, they have to carry out the entire financial responsibilities of endowment investments.
Shared Savings Banks
The board of trustees is also a valued member of mutual savings banks. Mutual savings banks sometimes employ a board of trustees who ensure the bank protects the funds of the depositors, borrowers, and community members. The responsibility here is to ensure that the funds deposited or invested by the customers get deposited and funded safely. They ensure that the depositors get interest and the customers get their principles upon their requests.
Board Of Trustees Vs Board Of Directors: How Are They Different
Board of trustees and board of directors are almost the same. But there are significant differences as well. A board of directors usually exists in organizations that are publicly listed. On the other hand, boards or trustees are present in many nonprofit organizations and charitable foundations. Also, many of the private organizations, hospitals, and art museums have a board of trustees. Here are some common differences –
| Field | Board of Trustees | Board of Directors |
|---|---|---|
| Domain | Common role in charitable and nonprofit organizations. | Usually visible in private firms. |
| Participation | They have more of an advisory role rather than being employees of the organization. Hence, they are not that actively involved with the business. | The board of directors takes an active part in making decisions for the organization and is a core part of the management. |
| Function | They safeguard the company’s assets. | They not only safeguard the assets and funds. But also, they set management policies, protect their own interests, and they also make decisions regarding different crucial matters. |
| Duties | The role of the board of trustees in nonprofit organizations is – to accept donations, make decisions regarding investments, and ensure the settlement of tax liabilities. | The board of directors has to track the financial performance of the company. Keeping the best interest of the stakeholders of the company and preparing company policies also come under their responsibilities. |
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Final Words
The board of trustees of a company or a charitable organization is crucial to that organization. They must keep true to their intentions and follow admirable work ethics. Their management and day-to-day work have a significant impact on how the stakeholders of the organizations benefit.
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Shahnawaz Alam
Shahnawaz is a passionate and professional Content writer. He loves to read, write, draw and share his knowledge in different niches like Technology, Cryptocurrency, Travel,Social Media, Social Media Marketing, and Healthcare.
