26 January 2018 by Felicia Willow
The Charity Governance Code is too ambitious for many smaller charities
The launch of the most recent Charity Governance Code has been welcomed throughout the sector, but how realistic is it for the thousands of smaller charities that are struggling with even basic governance standards?
Having worked on organisational effectiveness and charitable governance with many smaller charities, I have discussed the new code with trustees and staff. The response has not been encouraging.
Few have heard of the code and, when I introduce them to its contents, many are overwhelmed or discouraged by how high the bar has been set. The code is intentionally aspirational, specifically aiming itself at being ‘a tool for continuous improvement towards the highest standards’.
This is a praiseworthy ambition, but many smaller charities are struggling to meet even basic standards, such as implementing a strategic plan and ensuring trustees understand their role and responsibilities.
Many smaller charities with small staff teams are also experiencing difficulties with managing the operational-strategic divide (an issue on which the code is unfortunately silent) and few undertake adequate risk management or financial planning.
Importantly, many of these charities are effectively disengaged from the world of good governance; their trustees rarely attend training and do not tend to participate in discussions through forums such as LinkedIn, Charity Connect or ICSA.
To be clear, I agree entirely with what the code says. It sets out best practice that will make a positive difference to a charity’s functioning, if implemented. It outlines standards that all charities should be aspiring to achieve.
But even though the code provides a version specifically for charities with an income below £1 million per year, the risk is that its ambitious standards simply reinforce the impression that best practice standards do not apply to smaller charities, such as those with incomes below £250,000.
With 73.2% of charities bringing in £100,000 or less, the code risks being irrelevant for most charities.
“The risk is that the code's ambitious standards simply reinforce the impression that best practice standards do not apply to smaller charities”
The problem for me lies in the Charity Commission’s decision to withdraw its ‘Hallmarks of an Effective Charity’ standard and refer directly to the code as the primary guidance for the sector. I am not convinced that this move is helpful to the charities that most need to improve.
Crucially, the hallmarks were significantly shorter than the code and did not set such high standards. As such, they provided a more realistic target – something that smaller charities could focus on and achieve.
Take diversity, for example. The hallmarks urged charities to promote and value diversity in beneficiaries, staff and volunteers, and throughout all activities.
The code encourages boards to set up and monitor diversity objectives, include diversity in board reviews, reduce the barriers to a wider range of people joining the board, and report on the steps it takes to do so.
This is not wrong – it is all great practice, and there are certainly many charities out there that are ready to take this step. But this approach may not help the smaller, more insular charities that are so far behind that these aspirations seem completely detached from their reality.
Many smaller charity boards lack diversity. Trustees still invite their friends to join the board and do not consider open recruitment or pre-appointment appraisal. They view the idea with suspicion and fail to consider the concept beyond gender and race.
These boards often comprise people that share not only racial, gender and age-related characteristics, but also similar socio-economic statuses and life experiences.
For example, a recent conversation with a small military charity about diversity revealed the charity’s first – and only – female trustee lasted for only a single meeting after another trustee said he presumed she was there to make the tea. At another, a dominant founder/trustee only asked those who shared his background, viewpoints and business interests to join the board.
For those of us working in charitable governance best practice, these seem like stories from another century but, for many charities across the country, they are the current reality.
We need to get these boards to see diversity – and all the code’s principles – as a good thing, but it is inevitably going to be a slow, stepwise process. If the code only sets out ambitious end-goals, trustees may struggle to appreciate its relevance.
Smaller charities must not be forgotten when best practice standards are set, and perhaps we need a third version aimed at these smaller charities, which sets more attainable goals. In its current form it goes too far for some smaller charities and risks alienating many trustees who most need to take these issues seriously.