Trustee or Director?

by Manuel B. Quintal, Esq.

Does it really matter if we call the policymakers of a not-for-profit corporation as directors or trustees? It does not. As the cliché goes, “a rose by any other name is still a rose.”

At one time, people referred to members of the governing board of not-for-profit organizations “trustees, not “directors.’ The choice, of course, was and still is, a matter of preference. This distinction is often noted only in the academe and does not matter much. What matters is what we do, or are expected to do.

“Members of the governing board of not-for-profit corporations are “trustees” because something is given to them by others to take care of “in trust.” The not-for-profit organization entrusted them of taking care of and advancing their cause. That cause, generally, was the promotion of social, civic, cultural, or humanitarian objectives.”

Members of the governing board of not-for-profit corporations are “trustees” because something is given to them by others to take care of “in trust.” The not-for-profit organization entrusted them of taking care of and advancing their cause. That cause, generally, was the promotion of social, civic, cultural, or humanitarian objectives. That their interests may be advanced or served in the process is merely incidental to the hype or advancement of the not-for-profit organization’s purpose. Not for their financial gain. As such, the trustees must regularly account for and report to the members who have given them the trust.

The trend has changed over the years. Members of the governing board of not-for-profits have come to be more commonly known as “directors.” Perhaps, this indicates the thinking and attitude of many board members or even members of the not-for-profit organization itself.

The designation of “director” is most appropriate in business corporations because the governing board members usually own the most number of shares in the corporation.” Shareholders who own the majority shares have more stakes in the future of the corporation. They will lose more, financially, if the business falters. They will earn more in dividends if the business grows.”

The designation of “director” is most appropriate in business corporations because the governing board members usually own the most number of shares in the corporation. Shareholders who own the majority shares have more stakes in the future of the corporation. They will lose more, financially, if the business falters. They will earn more in dividends if the business grows. They make their right to direct the company’s business operations by the power of their investments’ size. Money equals power in business corporations.

For not-for-profit corporations, it is different. At least, it should be different. Whether known as “directors” or “trustees, ” the governing body members have the same stake. Each member has one vote, one voice. None of them, including the officers, individually or as a group, can claim to own the not-for-profit corporation. All members have the same rights and duties; people expect them to devote time, money, and skills to promote and advance the not-for-profit corporation’s cause. No expectation of material rewards is justified.

All individuals who desire to serve as members of the governing board of any not-for-profit organization must realize that the laws require them to act in a certain way. They have duties; the principal among them is the duty of care and duty of loyalty.

A duty of care demands that trustees or directors know the corporation’s activities and participate in its decision. It requires them to attend meetings and exercise their independent judgments.

“Within our growing and diverse, also divided communities, we need trustees or directors who not only know their duties but, more importantly, observe them.”

A duty of loyalty requires that trustees or directors promote the organization’s interests, not their self-interests. Not the interests of another organization or person. Not the part of any particular faction or factions in the organization. This duty comes into play in conflicts of interests and corporate opportunity issues.

Within our growing and diverse, also divided communities, we need trustees or directors who not only know their duties but, more importantly, observe them.


ABOUT THE AUTHOR: Manuel B. Quintal, ESQ., practices law in New York since 1989. He is active in the community as a member, an officer or a legal adviser of various professional, business, and not-for-profit organizations. He was a columnist of Newstar Philippines, an English language weekly newspaper published in New York, from 2006-2009. He was Executive Editor of International Tribune, an English language weekly newspaper for the Asian community, based in New York, from 2010 to 2012. He is admitted to practice law in the Philippines and New York State. He has graduate degrees in Political Science and an LL.M. major in International Law.

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