Executive and Trustee Board Strategies for 2020

Should your company include a board of trustees overseeing the board of directors and executives? Should you appoint executives who fulfill an unpaid trustee role? The first consideration will always be compliance; if your business entity fits the description of a charitable trust as defined by section 494 of the Internal Revenue Code, you have no choice but to separate the role of trustees and directors, and this is because of the inherent fiduciary duties. Aside from charitable trusts, you also see boards of trustees in nonprofit organizations and business entities that operate in the education sector, but there are other strategic reasons you may want to consider with regard to the roles of trustees.

As a company owner, what you should keep in mind about doing business in 2020 is that regulatory compliance is on the rise. Boards of trustees oversee governance, and this boils down to compliance. The visibility of trustees cannot be denied; you cannot appoint extremely private individuals to the board because they are expected to be the principal overseers. Ultimate decisions follow the rules of the Securities and Exchange Commission, which for publicly traded companies would mean the shareholders, but in practice these decisions fall on the executives, who would ideally act on the advice of trustees.

Guidance, perspectives, and the ability to raise funds are the main reasons you should consider a board of trustees. We are talking about individuals such as these board members, who are part of an organization dedicated to research of national security matters, and whose backgrounds inspire confidence. You can have a combination of trustees who come from within the company and others who are not involved in day-to-day operations. Ability to properly govern, advise, and obtain funding should be the criteria you use when appointing or selecting trustees.

As for the guidelines that trustees should follow, they must be stated on the bylaws of your organization. If you run a credit union, for example, the trustees will ensure that the directors and managers are properly serving the community. In the case of a private university that enjoys an endowment, the trustees will have a fiduciary duty plus the drive to expand on this endowment. You can keep the board of trustees down to a minimum; two is the magic number, but large corporations operate with boards that have committees and subcommittees. The trustees can advise the directors, but not the other way around. Keep in mind that your directors will still appoint or elect the executives.

As with all matters related to business, connections are everything, and this is why trustees are often called upon to obtain funding; nonetheless, compliance should be the top priority, and connections can greatly help in this regard. If your company has fallen out of compliance, trustees may be able to negotiate a remediation plan with regulators for the purpose of keeping the business afloat. As for the compensation of trustees, just make sure their services are not handled in the same manner as W2 employees.

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