Charities Need Effective Governance and Excellent Trustees - And Some Should Be Remunerated

07/09/2015 09:42 BST | Updated 05/09/2016 10:59 BST

The closure of Kids Company over the summer was one further case study in the importance of effective charity governance. Kids Company was high profile but sadly, what has been disclosed to date is not as uncommon in the sector as many might wish to think. Ultimately, responsibility for the stewardship and performance of any charity rests with the trustees. Board members can delegate much to the executive team but this cannot include their responsibilities and accountabilities.

This is not the place to dwell on the tragic demise of Kids Company. I believe that it is very important for a detailed and objective study to be undertaken of what went wrong and why. This should examine the roles, responsibilities, accountabilities and actions of the chief executive and her team, the trustees, the government, local government, funders and the Charity Commission.

My personal experience of serving on several charity boards and working with others, both as a charity executive and an advisor, has demonstrated to me that the quality and effectiveness of boards varies enormously, even between organisations of a similar size with similar programmes of activity. Diversity is important but so too are decent standards of governance - and in my view, it is the latter that simply must come first. The next priority is to ensure that the recruitment of new trustees does not simply replicate what is already around the board table in terms of skills, experience, mindset, perspective, and diversity (and here I flag up the lack of young trustees and trustees who are representative of beneficiaries as a particular impediment). And existing board members should be ready to be challenged by new colleagues.

The same applies in the public sector and in businesses. There is often a direct correlation between the quality of governance and the effectiveness of an organisation. To put it simply, charities have to get their governance right.

Being a charity trustee in the current political and economic environment does not always feel comfortable. Large or small, local or national - charities are facing common problems of reduced income and, if they are charities concerned with social issues, often increased demand for their services. There are many reasons for this but trustees have to be effective in their governance or the charity risks failure.

A charity board has a prime duty of being the custodian of the charity's mission, values and principles. In those charities with executive teams, the Board has to hold the chief executive and her/his senior team to account. It has to ensure that money and other resources are used efficiently, effectively and ethically. It should satisfy itself that the charity's performance and impact is exemplar and in line with its mission. It should champion the interests of beneficiaries whilst being mindful that staff and volunteers should be treated well. Boards should ensure that their charity is an excellent employer. They should have objective and independent access to the views of beneficiaries, volunteers, staff and other stakeholders including funders. They should ensure fundraising, the sources of funding and day to day finances are ethical, legal, and appropriate to the mission and long term sustainability/viability of the charity.

Being a charity trustee is not an easy task, and neither is it a responsibility-free role. It has to be taken seriously. In larger charities this should mean effective appointment processes, clear job descriptions and objectives, annual appraisals and means for dismissal for under-performance (although the latter requires careful implementation to avoid the risk of dissenting voices being summarily removed). It also requires chairs of boards who understand their role and responsibilities, and who are capable of leading their boards in accordance with the standards of good governance. I would also place firm and non-negotiable time limits on the time trustees and chairs should be allowed to serve. This may have been an issue for Kids Company.

I would expect charity boards to adopt the Nolan Principles of governance or something very similar. I would expect these to be published, with an annual report also published on how well the board and its members have adhered to these principles over the previous twelve months.

Trustees have to put the charity's mission and viability before all else. This means they have to be ready to take to take potentially tough decisions. They have to be ready to challenge orthodoxy and vested interests, asking the question 'why', and being willing to experiment and take calculated risks. And above all, trustees have to understand their organisation's structures, finances, asset base and most importantly, both the views of service users and beneficiaries, and the real 'impact' that the charity does (or does not) make.

Every pound spent should be accounted for in terms of its impact and contribution to the charity's mission. This enables trustees and their senior leadership teams to make rational choices, and to be properly accountable. Trustees have to be satisfied that their executives have the capacity and competency to manage and lead their organisations so as to maximise impact. They have to challenge and question, whilst supporting executives to drive innovation and change. And they also have to be ready to act when the executives do not.

Far too often, I hear about charities where the trustees and their thinking seems either fossilised by fear, lack of imagination or by a desire to maintain an unsustainable management structure, office accommodation or a service that no longer makes a positive impact. Actually, such approaches are probably contrary to the legal duties of a charity trustee and board, and they are most certainly out-with the values and behaviours that should be expected.

Board members require induction and mandatory training with continuous professional development - this cannot be regarded as luxury or discretionary. Failure to participate in such arrangements should lead to dismissal. Trustees may also require mentors and access to independent advice to enable them to undertake their duties.

I do find it worrying that the Charity Commission seemingly does not have a specific remit (or has even sought to have the remit) to support charities to improve their governance. This is a serious shortcoming, and if not addressed, then the national charity sector bodies will have no option but to step up to the plate on this.

In a world where the role of charities is increasing and the demands on their time, resources and the responsibilities that they are taking on are growing, I also think the time has come to revisit the debate about remuneration for trustees and chairs of major charities. This should be a matter solely for the Board which should account to their funders and beneficiaries for their decision on such payments. It should not be a matter to be determined or agreed by the Charity Commission. Most charities will probably decide not to make such payments but for those that do, they will need clear remuneration policies and full transparency.

Payments for trustees and chairs, if made, are simply about recognising their responsibilities, time commitments (which can be quite considerable), and facilitate greater diversity of trustees (and probably, for many charities, result in more trustees and chairs being representative of the users/beneficiaries and stakeholders).

To those that challenge the concept of payments, I respond by asking what the justification for objecting can be when NHS and other public body non-executive chairs and directors are being paid.

Voluntarism is to be championed and lies at the heart of our charity sector and long may it do so. However, I am confident that moderate and justifiable remuneration will not weaken the commitment or motivation of trustees if they are properly selected, appraised, and above all, held to account.

The next few years will be challenging for charities and their trustees. Paid or unpaid, charities need the very best trustees - fully aware of, equipped and prepared to carry out their responsibilities.