Charity governance model ‘broken’?
‘The model for governing many charities, and particularly large, complex charities, is broken. It is no longer workable’. So says Philip Kirkpatrick, deputy managing partner and head of charity at the law firm Bates Wells Braithwaite. In a speech at the University of Liverpool. Philip argued that voluntary trustees are less well placed to lead the strategy, oversight and management of an organisation than those paid to do it on a full-time basis. He also made the case that the expectation placed on trustees is unrealistic and unfair.
As a result, Philip proposes an alternative model, which he describes as an ‘assured unitary governance’ model. Charities would have a unitary board, whereby a charity’s senior executive directors sit with a non-executive paid chair and potentially another paid non-executive trustee. You would then establish an ‘assurance’ board formed of the charity’s membership who would be volunteers.
Philip suggests that the powers and responsibilities of the assurance board would be to:
- approve the appointment of the executive and non-executive trustees
- approve the remuneration of all trustees, authorise any arrangement in which all of the trustees are conflicted
- receive annual reports and accounts
- attend members’ meetings
- pay their member guarantee on an insolvent liquidation.
In this model, no members of the assurance board would be paid. They would need to be more engaged than the average non-trustee member of a charity and must be chosen with the same care many charities currently use to select their trustees.
I welcome this debate and think we should talk about alternative governance structures more. Philip makes a strong case and it’s an idea which is worth further exploration. It makes sense across the range of such a diverse sector to think that new approaches could be developed for organisations of different sizes.
The assurance model would likely only be applicable to larger charities where trustees face the issues Philip describes most acutely. It would also be wrong to think that changing the structure of governance is a silver bullet which will solve all these issues. How non-executive and assurance board members are recruited and trained, and how they understand their roles, would remain of real importance. After all, there have been plenty of governance failings in organisations with unitary boards.
A further risk is that by virtue of their diminished role as volunteers the assurance board could become more detached or remote from the decision making. They may have less of an understanding of the operating context and therefore become ill-placed to conduct their oversight and assurance function.
Removing, or diminishing, the voluntary ethos which runs through charities would likely also impact how charities are perceived by the public. When NCVO explored the kind of messages which build trust in charities we found that people are reassured that even the biggest charities are run by volunteers and that senior staff are accountable to a voluntary board. It would be hard to make this case with Philip’s proposed model. It would become harder to show that large charities were distinctive compared to large private-sector organisations. There is already a considerable degree of public scepticism about whether paid company directors and in particular remuneration committees, act in a responsible way. The more we can do to distance the sector from these sorts of concerns, the safer the reputational territory we are on.
Larger charities adopting the Charity Governance Code
The Charity Governance Code, published in July 2017, provides a set of aspirational standards for charities committed to good governance. Now a study launched this week examines the annual reports of 85 charities with income above £5m has found that just under half have adopted the code. The research, by accountancy firm RSM, found that 44% of the charities stated in their reports that they had aligned themselves with the code, whereas 56% made no mention of it.
Challenging charitable purpose
The National Secular Society has published a report arguing that ’the advancement of religion’ should no longer be a charitable purpose and that scrapping it could help to restore trust in charities and relieve pressure on the Charity Commission. The report found that 12,000 charities, 7% of all registered charities, list the advancement of religion as their sole charitable aim.
Training and Events
NCVO Annual Conference
There are still some limited spaces available to register for our Annual Conference which will take place on 1 April. The conference is themed on looking to the future with a focus on navigating through major changes and identify trends and tools that can support your organisation.
- Supporting Good Governance: Effective board servicing and administration– 1 March
- Charity trustees induction and refresher training– 29 March
- Financial intelligence for trustees– 26 April
- Safeguarding: legal responsibilities for trustees 29 April
- The High-Performance Board – 20 May