What Is a Board of Trustees and Its Responsibilities?

The Role of The Board of Trustees

What does a board of trustees do?

The organization is typically run by the board of trustees, who monitor business decisions and how they will impact the company. Organizations that have a board of trustees may include:

Typically, an organization’s bylaws specify how board of trustee members are chosen and what their duties are.

What is a board of trustees?

An elected or appointed group of management personnel serves as the governing body for a company through the board of trustees. Most members of the board of trustees are already in management or were chosen based on their prior involvement with the company as a whole. Some members of the board of trustees may be close friends or relatives of the business’s founders. Alternately, trustee members could be staff members who have devoted years of extraordinary service to the business.

In general, a board of trustees may have an equal number of internal and external employees. A board president may create subsections or subcommittees within a board of trustees, which can range in size from three to thirty members. This occurs more frequently with organizations like associations or banks. It guarantees that board members can devote more time and attention to particular target areas of an organization and create a separation of powers.

Board of trustees vs. board of directors

Despite some people using the terms interchangeably, a board of trustees and a board of directors have different roles. A board of trustees represents a private company, whereas a board of directors typically works with a public company or nonprofit organization. A board of trustees typically consists of paid employees, whereas a board of directors occasionally includes unpaid volunteers. The CEO is hired and recruited by the board of directors, and the board of trustees is typically employed by the CEO.

A board of directors typically keeps tabs on the CEO’s performance and frequently provides advice to the CEO. A board of directors may be in charge of selecting new members and deciding whether to promote them based on their performance. A board of trustees, in contrast, may not always have the authority to promote members, though they may make suggestions. Additionally, a board of directors is in charge of maintaining an organization’s reputation. Even when acting in the best interests of the company as a whole, a board of trustees may not always have the authority to make decisions regarding an organization’s brand. Depending on the type of business, other departments may be in charge of this.

Board of trustees responsibilities with examples

Some of the board of trustees responsibilities include:

Legal duties

Specific legal responsibilities for their organization are carried out by the board of trustees. A board of trustees is required by law to uphold the following obligations:

All board of trustees members must uphold their duties with due care and sole consideration for the interests of the company’s stakeholders. Board members need to exercise caution in everything they do related to their board work. By upholding the following standards, they satisfy the duty of care requirement:

According to the duty of loyalty, each board member must act in the organization’s best interests rather than their own or those of another organization. By upholding the following demands, they satisfy the Duty of Loyalty requirement:

By abiding by the company’s mission, the board members are protected by the duty of obedience. A business anticipates board members to uphold company policies and procedures. They satisfy the following conditions to fulfill their duty of obedience:

Holding funds

A board of trustees is in charge of keeping money “in trust.” This indicates that the board of trustees may act in the best interests of the stakeholders with regard to any organization-related funds. Two ways they do this are through the following examples:

University endowments, or a certain designated portion of funds and assets, are frequently under the control of a board of trustees. In this capacity, the board of trustees makes sure that a university uses its endowments in a way that serves the interests of its current stakeholders. A board of trustees has the option to manage endowments and invest endowment funds in a variety of projects. As an alternative, a board of trustees could give a manager control over the university endowments. The endowments investments are entirely the financial responsibility of the board of trustees.

In mutual savings banks, trust funds are another type of asset managed by a board of trustees. Mutual savings banks frequently have a board of trustees in place to make sure the institution safeguards the money of customers, depositors, and community members. A board of trustees oversees the secure transfer of customer deposits and investments. They make sure customers receive principal upon request and that depositors receive interest.

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