New Philanthropy Capital (NPC) have published a report (“It Starts from the Top”) about how to improve charity governance. The two most eye-catching recommendations are that it should be easier for Trustees to be paid, and that it should be up to each charity to decide if paid staff should be members of the Board alongside volunteers. They suggest that the requirements of SORP should be extended to include mandatory reporting of key governance activities like Board evaluation and Trustee appraisals, and also mandatory reporting on impact. Are they thinking straight?
It is a punchy discussion paper with some good ideas to debate. I particularly liked the emphasis on Boards not getting preoccupied with avoiding trouble, and having a positive hunger to improve impact. This is timely in the context of much finger-wagging aimed at Trustees. Other welcome suggestions are that Boards should fish in non-traditional ponds for diverse new recruits, and that employers should be encouraged to permit more employee volunteering, regarding being a Trustee as good for development of their staff’s skills, experience and confidence. We can all applaud the idea of more awards recognising good contributions to governance and the wider access to good practice, using new technology more creatively. So far, so good.
NPC are also careful to say that their suggestions are for discussion, that their more ambitious proposals might be piloted and evaluated before wider implementation, and that they are sensitive to the problem of appearing to add disproportionate burdens to smaller charities. They stress rightly that there is no one-size-fits-all approach to improving governance in such a large, diverse sector.
The eye-catching recommendations, however, are poorly supported and skimpily argued, despite the fact that NPC is fully aware that they are controversial. Making it easier to pay Trustees would have had no impact on the recent controversies that are referenced at the start and end of the report. The rationale used is that it would increase diversity, thereby improving impact in the longer run. They do not produce research or evidence to back up this claim. They say that such payments must not be made to wealthy Trustees, but without defining a limit or considering the pitfalls of means-testing. They do not explore the potential and limits of what can be done to improve diversity without paying Trustees.
More seriously, they do not acknowledge the key arguments against more widespread payment of Trustees, so their presentation of the issue is unbalanced. The key argument is that paying Trustees will, cumulatively and over time, destroy the public (including donor) perception that charity trustees are in it for the public benefit and not for their own gain; and that volunteer effort, freely given for love, is the animating force of charity: therefore, paying Trustees should be exceptional. NPC say that such decisions should be left to the individual charity, but this misses the point about the cumulative and collective consequences for the sector. At a time when public trust and confidence is under some threat from media attacks, it seems odd to omit this consideration altogether. Is it possible that a one-eyed pre-occupation with “driving impact” has obscured it from NPC’s view?
Next up is the suggestion that some paid staff should more often be Board members, with each charity deciding for itself. The advantage is summarised thus: “as with commercial companies, it ties key people into the governance of the organisation, meaning that they become party to major decisions and share responsibility for success with the Board”. I must say that I am unaware of a significant problem of cases where the Chief Executive of a charity is not party to major decisions and does not share (or indeed feel principal) responsibility for its success or failure. Is there evidence that such cases are at all common? The argument against is summarised as making it easier for Boards to dislodge an inadequate CEO, but that is not the main argument. The main argument is the same one NPC missed before, namely that Trustees should in general be seen to be acting without personal financial gain, and this is messed up if paid staff become Trustees too. Perceptions and possibly actual decisions are also affected if Trustees deciding the budget for pay and working conditions include key beneficiaries from such policies. Think of the larger Housing Associations, the least recognisable as charities: is this what NPC is edging towards for the future of the wider sector?
The suggestion that charities should have to report on such governance activities as Board evaluation, Trustee appraisal, role descriptions of Trustees and induction of new Trustees is an interesting one to ventilate. This is certainly good practice for the kind of model Board that NPC has in mind, driving for impact. But should it be a general requirement, supposing the Charity Commission ever had the resources to monitor and police it effectively? NPC have themselves done work recently showing that one in five charities include the advancement of religion in their objects – a huge part of the sector. Do they expect the average Parochial Church Council or equivalents in other denominations and faiths to be compulsorily reporting on these governance activities as part of “driving for impact”? And for how many modest or local charities would such concepts be operable? The volunteer Trustee ethos may rear its head yet again here: more sophisticated, larger organisations and volunteers may feel no qualms about performance appraisals, role descriptions and the like for their volunteer Trustees, but many others will no doubt feel them to be uncomfortable or inappropriate? Where would NPC draw the line on compulsory reporting?
Compulsory reporting on impact via SORP is also interesting but problematical. There is already a requirement to report on public benefit. If the Charity Commission were ever to have the resources, would it not be more productive to beef up the requirements for public benefit reporting rather than load more issues into SORP? And which charities do not, in their Annual Reports, and other reports to the regulator, report on impact, however imperfectly? Selecting compulsory measures of impact on which charities must report would be the devil of a job, because there are so many different kinds of measures, of variable relevance depending on the nature of a charity’s objectives and chosen strategies. And again we come back to the point that the Charity Commission is skint.
OK, a concise discussion document has its place. It is stimulating to be provoked. There are some good ideas in the mix. On the other hand, the more far-reaching and contentious the proposal, the more it deserves a degree of careful exploration and argumentation. That is missing here. Perhaps NPC’s next contribution on the subject will be equally bold but less skimpy?