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What Factors Affect Trustees' Remuneration?

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  • Written By: Terry Masters
  • Edited By: Shereen Skola
  • Last Modified Date: 02 September 2016
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    Conjecture Corporation
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Trustees' remuneration is typically affected by whether the underlying responsibility is for-profit or nonprofit, the scope of the duties required, the unique credentials of individual trustees and prevailing industry compensation standards. There is no restriction on the title of trustee to certain uses, although the title is typically used in a nonprofit context. It can also be used to refer to for-profit board members in instances where the company prefers to use the title, to indicate a court-appointed executor or to designate a person responsible for the administrator of a trust. In all instances, however, trustees' remuneration is carefully considered to avoid the perception of excess compensation and self-dealing.

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In nonprofit contexts, trustees typically serve as unpaid volunteers. It is somewhat rare for nonprofit trustees to receive any type of compensation, because the organization's donated income prevents executives from using it to pay salaries for administrative personnel. Certain sophisticated types of nonprofit organizations do compensate their board members if trustees are required to dedicate a significant amount of time to nonprofit matters or perform professional services. For example, if a trustee uses his professional media expertise to serve as the organization's spokesperson, the organization could decide to compensate him for acting in that role. The factors that tend to affect trustees' remuneration in a nonprofit setting are the organization's ability to direct money to that purpose and the perception that the trustee is providing a value-added service that goes beyond his obligations as a strategic volunteer.

When a trustee is appointed by the court or selected to act as the administrator of a trust, his remuneration is typically based on the size of the estate he has to manage and his level of expertise. Court-appointed trustees include bankruptcy administrators and will executors. In some courts, trustees' remuneration is set according to a fee schedule. The schedule is usually based on the size of the assets to be managed. Trust administration is typically a long-term relationship and most often a private matter between parties, so the parties are free to set any remuneration scheme that they agree upon.

For-profit corporations that refer to their board directors as trustees have the leeway to establish trustees' remuneration based on prevailing industry standards. Multinational corporations use attractive compensation packages to recruit board members. Corporations fix remuneration levels by taking into account a particular trustee's unique value to the board, which can often be a combination of the trustee's professional reputation and expertise. The decision will also factor in how much time the trustee will have to devote to corporate affairs. Finally, the corporation factors in prevailing standards for trustees' remuneration set by similar companies.

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