Charities need to be courageous

For more than a year the charity sector has been subject to a number of less than positive media stories. Campaigning, fundraising practices, executive pay and closures have all been centre stage with many commentators linking them to a general failure of governance in the sector. The ongoing saga around the demise, of Kids Company continues to raise questions about the quality and appropriateness of the governance model in the sector. Rightly or wrongly, there is a growing feeling that charity governance is no longer fit for purpose. Trustees’ Week 2015 brought the opportunity to engage in constructive debate.

Some of the many accusations levelled at the sector’s understanding and implementation of good governance principles are:

  • The term governance is frequently misunderstood and misapplied
  • Limited use of the unitary board adds to the governance challenge
  • The approach to board positions must move from amateur to professional
  • Inappropriate and haphazard methods are used to recruit trustees, as opposed to skills and evidence-based approaches
  • There is a lack of formal appraisal for boards collectively and individual trustees
  • Too many charities are fishing in too small a talent pool

ICSA brought charity sector governance professionals together for a roundtable event to address these issues and key points emerged from the frank and constructive discussion.

‘The elements of good governance in the sector are fine: it is their understanding and application that is not working’

Given the charity sector in England and Wales covers over 160,000 registered charities, it is unsurprising that some charities have better governance arrangements than others. There was no overwhelming feeling that the sectors’ governance arrangements were no longer fit for purpose. However, trying to apply one version of governance to such a diverse sector is inappropriate and unhelpful.

We do not expect the UK Corporate Governance Code to be implemented wholescale to non-listed companies or small and medium sized businesses – some aspects just aren’t appropriate, proportionate or necessary. In the corporate sector many investors prefer companies to explain rather than comply with every aspect of the code – this speaks to clear and qualitative thinking rather than just ticking boxes. Charities should also consider a comply or explain approach – follow Good Governance: a Code for the Voluntary and Community Sector to explain, clearly and succinctly, why it is not appropriate to do so in your case.

‘If you obey all the rules, you miss all the fun’

There should be more courage in the sector, and willingness, to experiment with governance arrangements and explain why particular actions have been adopted and whether they have been successful or not. If a charity believes that forming a unitary board or paying trustees will improve the chances of that charity fulfilling its charitable objects a case should be made.

Adopting governance principles unthinkingly is not necessarily going to lead to better leadership and oversight. Other methods are available to charities to ensure that their governance arrangements are effective for that organisation in their particular stage of development.

‘There is an inevitable gap between the board and the senior management team’
Regardless of the systems and processes within a charity, they are likely to come to nought if the appropriate behaviours are not encouraged and embedded. Active board engagement is essential to good governance and great governance comes from constructive challenge, insightful questioning and controlled tension.

Fundamentally, trustees should bear in mind the overarching aims of the charity and the community it serves. Each discussion and decision should move the charity towards achieving its charitable objectives. The governance arrangements might not always be ideal, but the impetus is on the board to find what is right for them and their stakeholders.

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ICSA has developed the Level 4 Certificate in Charity Law and Governance to help you enhance your knowledge and contribute more effectively to the sustainability of your organisation.

Louise Thomson, FCIS is Head of Policy (Not-For-Profit), at ICSA: The Governance Institute

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