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Framing Governance

05 February 2020 by Sara Drake

Framing Governance

The Charity Governance Code is seeking to strengthen various areas via a consultation

2019 was another busy year for the charity sector with issues around safeguarding, executive pay and boardroom diversity continuing to make the headlines. 2020 got off to a bumpy start with two former trustees of an international aid charity banned for paying themselves £320,000 in unauthorized remuneration. We should not, however, overlook much that is positive reflected in the 72% of New Year Honours’ recipients who were recognised for outstanding work in their communities in a voluntary or paid capacity.

It was good to see the award of a damehood to 2016 ICSA Awards Outstanding Achievement Winner Julia Unwin (former chair of the Civil Society Futures project and chief executive of the Joseph Rowntree Foundation), along with Gillian Guy of Citizens Advice. CBEs, OBEs and MBEs were also awarded to a raft of voluntary sector figures. With the negative headlines that often abound, it is easy to forget that the sector has much to be proud of.

Part of the reason for the negativity in recent years has been that the public understanding of how charities are run and their expectations of them are sometimes at odds with reality. Governance in the sector has also been found to be lacking. While improving governance cannot be a panacea for all the sector’s woes, there are a number of ways it can help. That is why we are working on a number of exciting initiatives to frame governance as an enabler to achieving charitable objects, including providing support for board discussions and practice around digital issues and ESG.

Risk reporting is one area that governance can help strengthen and we shall see an increased focus on risk management practices in 2020 and how those risks are reported to the Charity Commission in the event of a serious incident. With the expectation that trustees will be more robust in assessing whether risk appetite, management and oversight are fit for purpose, governance professionals can play an important advisory role. They must ensure that trustees view risk as more than purely financial and understand that a charity may face market and operational risks, including cyber risk, in undertaking its charitable purposes.

They can also help to move the issue of trustee recruitment on. While the argument for board diversity is fairly well debated and we are seeing more campaigns intended to encourage greater ethnic diversity or to attract younger trustees, in practice there is anecdotal evidence that a reluctance to seek fresh views still exists. This is unfortunate and boards need to pay more than just lip service to the idea of greater diversity. The Charity Governance Code, which we helped to develop and support as part of the Steering Committee, stresses the importance of recruiting diverse trustees. Getting on Board’s 2019 report provides some useful tips on new and innovative ways of attracting trustees.

Board reviews are obviously key and can add genuine value if recommendations are acted upon. Governance professionals will want to ensure that reviews are carried out on a regular basis and that findings related to skills, competencies and experiences are used to inform recruitment strategies.

Diversity and inclusion is one area that the Code is seeking to strengthen via the current light touch consultation. Open until the end of February, this includes a number of questions on how best to reflect the benefits of diversity and inclusion at every level in a charity. It raises questions around equality and is looking at whether, and how, the Code needs to reflect the importance of safeguarding to all those that come into contact with the charity by including a reference to the right to feel safe in the Integrity principle of the Code.

The welfare of staff is of continuing concern, with increased media reporting about workload, bullying and mental health. Charity boards need to give higher priority to such issues and to think carefully about how they attract, retain and motivate high-calibre staff.

Many charity boards already have environmental sustainability on their radar. The rise of climate change activism and increased public awareness of environmental issues has shone a spotlight on the E part of ESG. Charity boards should be looking to incorporate environmental sustainability into their vision and mission conversations, as well as considering how their charitable activities impact the environment. Governance professionals will be thinking about the governance impact of these issues now as trustees face more persistent questions about their stance on climate change and the environmental consequences of their charity’s operations.

With so many issues now warranting the board’s attention, boards will have to guard against meeting agendas that focus too much on compliance matters at the expense of strategy and impact. This is easier said than done, with the increased regulatory requirements placed on trustees, but it is essential if the sector is to meet and exceed public expectations and rebuild the trust that will ensure its own sustainability.

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