A board of trustees is a governing body of elected or appointed individuals responsible for an organization’s overall management and direction. Their purpose is to steer the institution towards a sustainable future while upholding its core mission. The board ensures the organization serves the best interests of its stakeholders and the community through its strategic decisions.
Organizations with a Board of Trustees
The board of trustees structure is found in non-profit and public institutions where a mission, rather than profit, is the driver, such as universities, public libraries, and hospitals. These entities are built on a foundation of public trust and designed for long-term service to the community.
This governance model is well-suited for organizations that manage significant assets, like university endowments, for the benefit of others. The board acts as a steward, ensuring the institution remains accountable to its beneficiaries and the public. This structure provides oversight that aligns with the organization’s purpose.
Core Responsibilities of a Board of Trustees
Setting Strategic Direction
A primary function of the board is to establish and review the organization’s long-term strategic direction. This involves participation in strategic planning to create a roadmap for the future. Trustees approve the vision and ensure that all goals and activities align with the institution’s core purpose.
Ensuring Financial Stability
Trustees hold responsibility for the financial health and integrity of the organization. This includes approving the annual budget, reviewing financial reports, and ensuring adequate financial controls are in place. The board also oversees an independent financial audit to verify financial statements and ensure compliance. Their oversight protects the organization’s tax-exempt status and assures donors that contributions are managed responsibly.
Hiring and Overseeing Executive Leadership
The board is responsible for hiring the chief executive, such as a CEO or Executive Director. Their role extends beyond selection to providing ongoing support and resources to this leader. The board also establishes clear performance expectations and conducts regular evaluations of the executive’s performance against established goals.
Upholding the Organization’s Mission
The board acts as the guardian of the organization’s mission. Trustees are tasked with ensuring the mission remains relevant and that the organization’s programs and services advance its purpose. This requires them to periodically review the mission and vision statements to ensure activities reflect these guiding principles.
Serving as Ambassadors and Fundraisers
Trustees are expected to be advocates and ambassadors for the organization within the community. They use their networks to enhance the organization’s public standing. Board members also play a direct role in fundraising by contributing personally and participating in development activities to secure financial support.
Establishing Governance Policies
The board is responsible for creating and maintaining a system of governance. This involves developing and approving policies that guide the board’s own operations as well as high-level organizational policies. The board ensures that necessary committees are in place to manage its work.
Key Legal Duties
The responsibilities of a trustee are underpinned by legally binding fiduciary duties. These duties provide a legal framework for their conduct and decision-making, ensuring they act in the best interest of the organization. The fiduciary standard encompasses three specific obligations that all trustees must uphold.
The first is the Duty of Care, which requires trustees to act in good faith and with the diligence that a reasonably prudent person would exercise in a similar situation. This means they must be actively engaged, attending meetings, reviewing materials like financial reports, and making informed, independent judgments. This standard compels trustees to be prepared to participate meaningfully in governance.
The Duty of Loyalty is the second legal pillar, mandating that trustees place the interests of the organization above any personal or professional interests. This principle requires trustees to avoid conflicts of interest, where their personal activities or affiliations could potentially benefit them at the organization’s expense. When a potential conflict arises, it must be disclosed, and the trustee must recuse themselves from the decision-making process.
Finally, the Duty of Obedience obligates trustees to ensure the organization remains faithful to its central mission. It also requires them to ensure the organization complies with all applicable laws and regulations. This duty ensures the institution does not use its funds for activities that fall outside its stated charitable purpose.
Board of Trustees vs Board of Directors
A common point of confusion is the distinction between a board of trustees and a board of directors. While the terms are sometimes used interchangeably, they govern different types of entities with distinct objectives. The difference lies in the nature of the organization they serve.
A board of trustees is the governing body for non-profit or public institutions, such as charities, universities, and hospitals. Their decisions are driven by a commitment to a mission of public service or a specific charitable cause. The focus is on preserving assets and ensuring the organization can fulfill its purpose for future generations.
In contrast, a board of directors governs for-profit corporations. Its primary legal responsibility is to the company’s shareholders, and its main objective is to increase shareholder value. Their decisions are ultimately evaluated based on their impact on the company’s financial performance and profitability.
Differentiating Governance from Management
An important distinction exists between the role of the board and that of the organization’s professional staff. The board’s function is governance, not day-to-day management. This concept is summarized with the phrase “noses in, fingers out,” meaning the board should be knowledgeable about the organization but not meddle in its daily operations.
The board is responsible for setting the strategic “what” and “why.” Trustees define the organization’s mission, establish its long-term vision, and approve the high-level strategies and policies to achieve that vision. They provide oversight from a high-level view.
The chief executive and their staff are responsible for the operational “how.” Management handles the daily tasks, from program implementation and staff supervision to executing the strategic plan approved by the board. This separation of duties allows the board to focus on strategic direction while empowering staff to manage the organization.