Board of Trustees: Definition, Members, and Responsibilities

Definition of a Board of Trustees

A board of trustees is a group responsible for managing an organization. They are appointed or elected and have overall responsibility for making management decisions that align with the best interests of stakeholders.

How a Board of Trustees Works

A board of trustees consists of key individuals involved in managing an organization. Other members may be appointed or elected based on their expertise and experience. There may be a combination of internal and external trustees. Boards of trustees are commonly found in private organizations such as mutual savings banks, universities, university endowments, art museums, and associations.

While similar to a board of directors, a board of trustees may have specific tasks in some organizations. The terms "board of directors," "board of governors," or "board of regents" are sometimes used interchangeably with "board of trustees." Public corporations and mutual funds may have regulations that outline the oversight and duties of the board of trustees. In certain cases, a board of trustees may manage a designated section of a larger organization.

The framework for a board of trustees is typically determined by regulatory obligations and the organization’s bylaws. The number of individuals on a board can range from three to 30, with sub-committees established to manage specific areas of the organization and ensure a level of checks and balances.

A crucial role of the board of trustees is to hold property, funds, or assets "in-trust" on behalf of others, with a fiduciary duty to protect them. University endowments and mutual savings banks often rely on a board of trustees to fulfill this responsibility.

Key Takeaways

• The board of trustees is responsible for managing an organization.
• They prioritize stakeholders’ best interests.
• Boards of trustees are commonly found in private organizations.

University Endowments

University endowments often have a dedicated board of trustees responsible for overseeing and managing a portfolio of assets known as an endowment. These trustees must act in the best interest of all stakeholders and may choose to invest across different asset classes. They can hire institutional managers or manage the assets themselves. Regardless, the board of trustees has a fiduciary duty to make investment decisions for the endowment.

Mutual Savings Banks

Boards of trustees of mutual savings banks prioritize the interests of depositors, borrowers, and the community. They ensure that customer deposits are secure, invested safely, and that interest and principal are accessible upon request.