What Is a Board of Trustees?

What Is a Board of Trustees?

A board of trustees is an appointed or elected group of individuals that has overall responsibility for the management of an organization. The board of trustees is typically the governing body of an organization and seeks to ensure the best interest of stakeholders in all types of management decisions.

How a Board of Trustees Works

The board of trustees typically includes key individuals involved with the management of an organization. Other individuals may be appointed or elected based on their expertise and experience in areas pertaining to the management of the organization. The board will often have a mix of internal and external trustees.

A board of trustees is similar to a board of directors and may act as such in some organizations. A board of trustees is more commonly found in private organizations. Entities with boards of trustees include mutual savings banks, universities, university endowments, art museums, and associations.

The phrase board of trustees can often be used interchangeably with the board of directors, the board of governors or board of regents. Some entities such as public corporations and mutual funds may have requirements designated by industry regulations that pertain to the oversight and obligations of the board of trustees. In some cases, the board of trustees may be a special group tasked with managing a designated portion of a comprehensive organization.

The framework for a board of trustees is typically set by regulatory obligations and entity direction outlined in an organization’s bylaws. A board of trustees can range from three to 30 individuals. Boards are often divided into sub-committees, which can help to manage target areas of an entity while also providing for some segregation of power.

Often the board of trustees will be responsible for holding "in-trust" the funds, assets, or property that belong to others with a fiduciary duty to protect them. Two leading entities using a board of trustees structure include university endowments and mutual savings banks.

University Endowments

A university endowment may have a special board of trustees that is responsible for the oversight and management of a portfolio of assets known as an endowment. The board of trustees has a fiduciary responsibility to manage the funds in the best interest of all stakeholders. It may choose to invest the endowment assets across a range of investments utilizing the services of various institutional managers in managing the endowment assets. It may also choose to work with a single institutional manager in a separate account structure or take on the full duties of managing the assets itself. Regardless of the structure of an endowment portfolio, the board of trustees has fiduciary responsibility for making all of the endowment’s investment decisions.

Mutual Savings Banks

Mutual savings banks have boards of trustees who ensure that the interests of the depositors, borrowers, and members of the community in which they serve are considered and protected by bank management. The board has the duties of making sure customers' deposits are secured and invested safely, interest is paid to depositors and that the customers' principal is available to them on request.