Trustee compensation varies based on whether it’s for-profit or not-for-profit, duties required, individual credentials, and prevailing industry standards. Nonprofit trustees are typically unpaid, but certain organizations may compensate them for professional services. Court-appointed trustees’ compensation is based on estate size and experience. For-profit corporations set compensation based on industry standards, unique value to the board, and time commitment. Overcompensation and self-dealing are avoided in all cases.
Trustee compensation is generally affected by whether the underlying responsibility is for-profit or not-for-profit, the scope of duties required, the unique credentials of individual trustees, and prevailing industry compensation standards. There is no restriction on the title of trustee for certain uses, although the title is typically used in a non-profit context. It can also be used to refer to for-profit board members 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. However, in all cases, trustee remuneration is carefully considered to avoid the perception of overcompensation and self-dealing.
In nonprofit contexts, administrators often serve as unpaid volunteers. It’s rare for nonprofit trustees to receive any compensation, because the organization’s donated income prevents executives from using it to pay administrative staff salaries. Certain 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 provide professional services. For example, if a manager uses his professional media experience to serve as a spokesperson for the organization, the organization might decide to compensate him for acting in that role. Factors that tend to affect trustee compensation in a not-for-profit setting are the organization’s ability to direct money for that purpose and the perception that the trustee is providing a value-added service that goes beyond your obligations as a strategic volunteer.
When a trustee is appointed or selected by a court to act as trustee, their compensation is generally based on the size of the estate they are required to manage and their level of experience. Court-appointed trustees include bankruptcy trustees and executors. In some courts, the trustees’ compensation 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 the parties, so the parties are free to set up whatever remuneration scheme they agree to.
For-profit corporations that refer to their board directors as trustees have the leeway to set trustee compensation based on prevailing industry standards. Multinational corporations use attractive compensation packages to recruit board members. Corporations set compensation levels based on a particular manager’s unique value to the board, which can often be a combination of the manager’s professional reputation and experience. The decision will also take into account how much time the manager will have to spend on corporate affairs. Finally, the corporation takes into account the current standards for the remuneration of trustees established by similar companies.
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