Trustee compensation is influenced by profit/non-profit status, required functions, trustee credentials, and industry standards. Non-profit trustees are typically unpaid volunteers, but may be compensated for professional services. Court-appointed trustees are compensated based on estate size and expertise. For-profit companies can set compensation based on industry standards and trustee value to the board. Overcompensation and self-harm are avoided in all cases.
Compensation of trustees is typically influenced by whether the underlying responsibility is for profit or not, the scope of functions required, the unique credentials of individual trustees, and prevailing industry compensation standards. There is no restriction on trustee title for certain uses, although the title is typically used in a non-profit context. It can also be used to refer to for-profit directors where the company prefers to use the title, to denote an executor, or to designate a responsible administrator of a trust. In all cases, however, the remuneration of trustees is carefully considered to avoid the perception of overcompensation and self-harm.
In non-profit settings, administrators typically serve as unpaid volunteers. It’s quite rare for nonprofit trustees to receive any kind of compensation, because the income donated by the organization prevents executives from using it to pay administrative staff salaries. Some sophisticated types of nonprofit organizations compensate their board members if the trustees are required to spend a significant amount of time on nonprofit matters or perform professional services. For example, if a trustee uses his professional experience in the media to serve as a spokesperson for the organization, the organization may decide to compensate him for acting in that role. Factors that tend to influence the remuneration of trustees in a non-profit context are the ability of the organization to direct money towards that purpose and the perception that the trustee is providing a value-added service that goes beyond its obligations to strategic volunteer.
When a trustee is court-appointed or selected to act as trustee, 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 executors. In some courts, the remuneration of directors is fixed on the basis of a scale. Planning is generally based on the size of the resources to be managed. Trusteeship is typically a long-term relationship and most often a private matter between the parties, so the parties are free to set any agreed remuneration arrangements.
For-profit companies that refer to their directors as trustees have the leeway to set the remuneration of trustees based on prevailing industry standards. Corporations use attractive compensation packages to recruit board members. Firms set 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 experience. The decision will also take into account the time that the trustee will have to devote to corporate affairs. Finally, the company takes into account the prevailing standards for the remuneration of trustees set by similar companies.
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