How are Employee Ownership Trust trustees selected, and do they have a fiduciary duty?

The trustee is central to an Employee Ownership Trust (EOT): they hold the company in trust on behalf of the employee beneficiaries and are legally bound to act in those beneficiaries' best interests.

Fiduciary duty. A trustee owes a fiduciary duty to the trust's beneficiaries, the employees. That is a legal standard requiring them to act prudently and in the beneficiaries' interest, not their own or the founder's. In most US EOTs the trustee is a "directed" corporate trustee, handling administration with little day-to-day decision-making.

How trustees are selected. This is defined in the trust documents when the EOT is formed, and there are options:

• Independent or professional trustee — an individual or firm with trust expertise, chosen for independence.
• Institutional / corporate trustee — a trust company that administers the trust as a service (a common choice, and part of the roughly $10,000 to $20,000 annual cost).
• In some designs, individuals connected to the company may serve, though independence is often preferred to keep the fiduciary role at arm's length.

How the trustee is appointed and replaced, and how much discretion they hold versus the board and any stewardship committee, are spelled out in the trust instrument. Because the trustee's role is legal and fiduciary, the selection and the trust terms should be set with an attorney experienced in employee-ownership transitions.

This is general information, not legal or tax advice; consult a qualified professional for your situation. Note that US and UK EOT regimes differ, so trustee rules vary by jurisdiction.