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The bright side of charity governance

01 October 2018 by Cecile Gillard

The bright side of charity governance

A healthy culture and ethical consideration is important for charities to achieve good

The public, rightly, have an expectation that organisations that are legally charities exist for good – in the broad, everyday understanding of the word ‘good’. People expect charities to carry out activities that will benefit the public in a way that sits well with being an organisation that exists to do good.

Legally what charities are is rather more complex. An organisation is a ‘charity’ in England and Wales if it is established for charitable purposes only, and is subject to the charity jurisdiction of the High Court.

The notion of ‘charitable purposes’ has two core elements. Firstly, that the purposes of the particular organisation fall within one or more of the descriptions of charitable purposes set out in the Charities Act 2011 and secondly that those particular purposes, which are usually specified in the organisation’s governing document (that is, its constitution), are ‘for the public benefit’.

Each element is supported by more detailed legal principles, which help determine factors such as what is ‘benefit’ and what detriment may militate against meeting the required ‘benefit’ legal conditions, or who ‘the public’ are in the specific context of an individual organisation and the particular wording of its charitable purposes.

In addition, charities, trustees and their advisers should always consider the Charity Commission’s statutory guidance on public benefit.

The dark side

In the charity context, ethically and morally (and often legally too) the end does not justify the means. Charity ethics matter and positive cultures need to be enshrined in all charities.

Sadly, there have been a number of recent incidents where either actual harm appears to have been caused, in the context of a charity’s activities, or the way in which some of those activities have been conducted is at odds with the concept of ‘doing good’.

Poor practice in how activities are carried out – fundraising activities, for example – can cause significant damage not only to the individual charity but also disproportionate damage to the majority of charities that quietly go about the business of helping their beneficiaries.

“Some people already feel overloaded with different codes, proliferation of more might cause confusion and fatigue”

The impact of such incidents in reducing public trust and confidence in charities as a whole is of particular concern, a risk that the Charity Commission frequently reminds charities about when it issues its public conclusions on concerns raised in cases such as the Presidents Club Charitable Trust.

Linked to culture

It is now widely recognised in all sectors, including the charity sector, that healthy cultures and positive behaviours are vital foundations for the effective delivery of good governance.

Both factors help trustees make constructive challenges to previously accepted ways of doing things and underlying assumptions. They also facilitate good decision making, which furthers the charity’s charitable purposes and drives forward positive change, when it is needed.

As ICSA’s guidance note, ‘Improving charity boardroom behaviours’, explains: ‘Good governance, in any organisation, is more than having the right policies, procedures and protocols in place. Although these factors are important, they are ineffective if the people responsible for leading the organisation are ignorant of them, or unable or unwilling to adhere to them.’

Wise charity trustees find ways to identify behaviours and practices that indicate risks and potential downward trends in the organisation’s culture. They search out and change any realities that do not match the charity’s stated values or the core shared values of charities as a whole.

Some tools to help charity leaders think about their charity’s culture and some practical insights into how that culture can be assessed, measured and improved are offered in ICSA’s ‘Cultural markers in charities’.

The role of trustees

‘Improving charity boardroom behaviours’ suggests that, in carrying out their role, charity trustees should be guided by three key areas:

  • Their legal duties – at the top level that means their activities align with the core principles of their general legal duties
  • The charity’s governing document 
  • The ethical standards expected of those who hold any public office – known as the Nolan principles.

The Nolan principles require office holders to act with selflessness, integrity, objectivity, accountability, openness and honesty and to exhibit these characteristics in their own behaviour. In addition, they should be ready to challenge poor behaviour when it occurs.

This is in keeping with the Charity Governance Code’s principles, particularly those relating to leadership, integrity and openness and accountability.

“Some people in the charity sector already feel rather overloaded with different codes and good practice standards. Proliferation of more might cause confusion, as well as fatigue”

At the hard law level, trustees are at risk if they fall significantly short in fulfilling their general legal duties to an appropriate standard. Lack of awareness of risk, inadequate corrective responses if things begin to go awry or failure to act once concerns are identified can move trustees from potential personal risk to actual culpability, at both ethical and legal levels. The moral of this tale is ‘see it, say it, sort it’ – now.

An ethics code

A draft charity ethics code was issued earlier this year, with the intention of providing a further tool for supporting charities to take an ethical approach to their activities.

The principles it suggests resonate closely with the values that underpin all charities: putting beneficiaries first, operating with openness and integrity and recognising that everyone who comes into contact with a charity has a right to be safe, to be treated with dignity and respect and to experience a safe and supportive environment.

Although the underlying aims of the proposals are laudable, in many ways they replicate the principles and exemplars in the Charity Governance Code and the Nolan principles. Some people in the charity sector already feel rather overloaded with different codes and good practice standards. Proliferation of more might cause confusion, as well as fatigue.

Many charities are small to medium-sized in terms of people and other resources, including financial resources – Charity Commission data indicates that 93% of registered charities have annual income below £500,000.

The best way forward may perhaps be to combine some codes and guidance, bringing together the best wisdom and practical contents from the various
available material.

Cecile Gillard is a charity law, regulation and governance specialist. She is also co-tutor for the ICSA Certificate in Charity Law and Governance and author of several publications.

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