The executive trustee

The purpose of the role

To give the trading company a direct link to the trustee board. Somebody in the room understands the business from the inside — the numbers behind the papers, why a proposal is shaped the way it is, and what the trading company is actually worried about.

Without that link, a trustee board depends entirely on what it is told in writing by people who are not present, or present only fleetingly.

How the role is appointed

Executive trustees are usually chosen by the trading company directors because of their role or their knowledge of the business.

You might be a director of the trading company. Equally you might be a senior or long-serving employee whom the trading company believes genuinely understands the business and what it is trying to achieve. The nature and extent of the conflicts described below will depend on which position applies.

The first distinction to understand

Although you were appointed by the trading company, you do not sit in this role as its representative or to advance its interests. Your duty is to exercise your own independent judgement in the best interests of the beneficiaries you serve.

At times that may require you to take a position contrary to the trading company’s wishes. Doing so is not disloyalty; it is a proper fulfilment of your responsibilities as a trustee director.

Depending on your day job, you might also now hold two offices with different duties, and they are capable of pointing in different directions. As a director of the trading company you must promote the success of that company. As a trustee director you must act in the interests of the beneficiaries of the trust. Most of the time the two sets of duties align. When they do not, the conflict should be recognised and managed rather than assumed away.

In meetings, it is good practice to make clear which capacity you are speaking in.

Conflicts to manage

For someone who is also a director of the trading company, the conflict is structural rather than occasional and may be particularly acute.

You will help prepare a proposal as an executive and then be asked to approve it as a trustee. You will know the assumptions behind a forecast the trustee board is being asked to rely on. Your own remuneration may come before the trustee board. Deferred consideration owed to a former owner may compete with investment you want for the business.

The answer is not to avoid these situations, which is impossible, but to declare early, record the declaration, and be willing to withdraw. A standing declaration at the start of each meeting is ordinary practice, and it is there for your protection as much as anyone’s.

Using inside knowledge well

An executive trustee will often know more about the business than the other trustee directors. That knowledge is a central part of the contribution.

It becomes a problem when the trustee board starts relying on your assurance instead of its own scrutiny — or when your presence discourages other trustee directors from asking the obvious question, because they assume you have covered it.

It is worth watching for this dynamic. If discussion routinely ends as soon as the executive trustee offers a view, the board is no longer making full use of its collective judgement.

Common pitfalls

• Speaking on behalf of or for the trading company in a trustee meeting without saying that is what you are doing.
• Defending a proposal you helped write, rather than helping the trustee board understand it.
• Becoming the trustee board’s only source of information about the business.
• Failing to declare a conflict because it is so constant that it has stopped feeling like one.
• Treating the trustee board as an obstacle to be managed, rather than a legitimate part of the governance structure.