As someone looking to embark on a portfolio career, it can be difficult to pinpoint whether a non-executive role or a trustee role could be your best fit. After all, the roles have a lot in common, and on paper, they are almost identical, but there are some key differences that you should be aware of and this article will explore those in more detail.
Investopedia defines a non-executive director as a member of a company’s board of directors who is not part of the executive team. A non-executive director typically does not engage in the day-to-day management of the organization but is involved in policymaking and planning exercises.
While a Trustee is defined as a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of bankruptcy, for a charity, for a trust fund, or for certain types of retirement plans or pensions. Trustees are trusted to make decisions in the beneficiary’s best interests and often have a fiduciary responsibility to the trust beneficiaries.
There are a number of similarities shared by the roles of a non-executive director (NED) and a trustee, but it is much easier and clearer to define the relationship between the two roles by noting the differences.
Fixed or Flexible?
A trustee’s role is relatively flexible by comparison to that of a non-exec director; trustees tend to find themselves and their role far more malleable to the needs of the organisation, whilst non-executive directors are more likely to find their role more clearly defined and with a more stable and fixed definition as an independent member of the Board. NEDs are expected to be informed and experienced, offering their creative insight and advice to the management of the business but not actively engaging in carrying out or administering those actions themselves within the business. The demand of flexibility on trustees tends to require more of a personal commitment to both the work of the organisation and the institution itself, whilst non-exec directors are more likely to find coherence in what is asked of them.
Level of Involvement
The responsibilities of a NED include ensuring the future of the institution, but a trustee is required to act as an ambassador and the role sometimes demands learning new skills to effectively carry out one’s duties. Due to the propinquity of the trustee and the organisation, one may find oneself overly involved in the management of smaller, routine activities whereas a non exec director is more likely to maintain a level of objectivity. NEDs will find themselves in a director role that does not hold an executive office, or is neither full- nor part-time, however this does not mean their value should be underestimated.The non executive director will find themselves providing objective oversight of management, while the trustee (in the non-profit sector) may have a seat on the board and takes responsibility for the general management of the organisation.
Aims and Objectives
NED roles are often recruited with consideration of their commercial experience to facilitate institutional internal governance changes and bring about a restoration in value for shareholders. NEDs are often well-informed when it comes to economics and politics, making them the ideal candidate to interpret policy, introduce and advise on organisation-wide changes and provide strategic oversight as required. As a NED may find themselves on numerous boards simultaneously, it is important they have and maintain open channels of communication with management to stay well informed, whereas the trustee may well find themselves being the one called upon to provide this governance to a suitable extent.
There is overlap between the two roles, and the best way to gain a working comprehension of these is from inside an institution. Ensure you explore the scope of what will be expected of you and whether the role is open-ended or for a fixed period. Ideally look for roles that you have a personal interest in (whilst as a NED, also be wary of conflicts of interest). Be prepared to promote the success of the company, exercise your skills and engage your judgement.
