I have been invited by the New Philanthropy Capital (NPC) to contribute to a workshop on the role and responsibilities of a charity trustee when the charity is considering a significant issue such as a major contract or a merger or similar. This has made me think hard about the role, responsibilities and accountabilities that I and many thousands of charity trustees have in situations which could potentially destroy the charity if the wrong decisions are taken.
I have had many years' experience of as a trustee and have also been a senior executive in a major charity advising and supporting trustees. Whilst no two situations are the same, there are many general lessons that can be drawn from the collective experience across charities of various sizes and with varying missions.
A trustee has a clear legal and moral duty to act in good faith in the best interests of the charity's aims and mission. I believe that trustees must always remember this duty. This could not be clearer to write but can be far less easy to achieve. As trustees we are the custodians of the charity's mission and values but we have to challenge and advocate for progress and change; we need our traditional values to apply in contempoary setting. Trustees have to ensure that the charity remains relevant.
This duty should not imply that a trustee should seek to perpetuate the life of a charity that no longer has a role in society or one that it is incapable, for whatever reason, of sustaining itself. Trustees have to be prepared to vote to close charities and to allow them to be taken over by others when such acts are the best way of securing a charity's aims and mission.
Trustees are not employees - although I do recognise in small charities, they may be volunteer workers in addition to their trustee role. The role of the trustee and board member is to be strategic and not operational - easier to achieve in medium to large charities. They should: set and regularly review the charity's aim and mission; set a strategic direction; agree strategic and business plans; review performance; and hold the employed executive to account. Of course, the appointment and performance management of the chief executive (often undertaken by the chair on behalf of the board) is one of the most important responsibilities for trustees; as is removing chief executives who are continuously under-performing. Succession planning and talent development for the senior executive posts and trustee board membership are critical too. In my experience, these latter responsibilities are typically given far too little attention by trustees - as arethe diversity and make up of boards; and trustee and chair appraisal - are we the right people and are we performing well? Good governance is essential and need to be promoted at all times.
Trustees must know their boundaries and not stray into operational activities unless in very exceptional circumstances and then only for a short period of time and with a specific brief and set of accountabilities. Equally, they must be careful to avoid crossing other boundaries such as potential conflicts with their other interests, employment or positions external to the charity. Again, one sees too many trustees, usually with good pragmatic intentions, stray across these lines. The reality is, however, that a board chair and fellow trustees have a duty to prevent such straying. They also must ensure that a small clique of board members (including board officers) are not taking decisions or involved in critical activities to the exclusion of the board as a whole.
Whilst charities that employ staff should always seek to be exemplar employers and look out for the interests of their staff at all levels in their organisation, they should not be seduced into putting staff interests ahead of those of their beneficiaries and the mission. In my experience, this can be emotionally challenging for trustees, especially when they have built up trust and strong relations with the staff team.
Too many charities tend to be very conservative and often too risk averse as well. Whilst trustees have to be clear about the risks that they are prepared for the charity to take with its assets, charitable funds and reputation, the prime drivers have to be the promotion and protection of the aims and mission - and sometimes this requires some risk taking. Trustees have to be confident that they are in receipt of the best advice possible from staff and if necessary advisors when contemplating any decision with risks associated with it - in reality almost every significant decision. Often, this will mean: being confident that those advising them are competent to do so on the issue under consideration - and if they are not, securing appropriate unbiased and independent support and advice; asking challenging questions and ensuring that they are being properly answered; taking the necessary time to come to hard decisions whilst avoiding undue procrastination; and wherever possible, consulting and listening to key stakeholders include beneficiaries.
Public sector contracting can be attractive to many but not all charities. It can offer long term revenues and may be the only means of securing public sector financial support. For many charities, these contracts can be important and enable them to fulfil their missions. However, as the Work Programme and some under-funded local authority contracts have demonstrated, an inappropriate contract can literally bankrupt a charity or push it far away from its values and mission.
My view is that trustees should adopt clear strategies to guide their executives when the latter are faced with potential contract bidding opportunities. These strategies should include:
•guidance on interpreting the charity's aims, mission and strategies; and what tolerance is acceptable and on what conditions
•clear boundaries on the trustees appetite for financial, commercial, reputation and operational risk
•criteria for deciding, if at all, how to assess other public, social or business sector organisation(s) to partner with and on what terms
•statements on the use of charitable income for bidding, and even subsidising additional service delivery beyond the contract specification
•clarity on the delegated authority given to the chief executive and senior executives and what are reserved matters for the whole board. I would not , for example, expect any major contract to be pursued or signed without full board (not sub-committee or executive delegation) approval
•assurances that the executive team has appropriate skills, expertise and capacity to
oidentify, review and qualify potential bids (and where necessary to advise the board to abort the bidding process)
o prepare bid submissions
oundertake adequate risk assessment and manage those risks
o negotiate contracts in line with agreed board strategies and in the interests f the charity's aims and sustainability
oand if the contract is won to deliver it
•and if these skills and expertise are not available consider how best to secure them
A trustee board that cannot satisfy itself on these points should not be allowing the charity to be involved in public sector contracting. To do so is an abject failure of duty.
The board will wish to receive regular and verified performance reports of all material contracts under way. It will wish to have the ability to instruct interventions and if necessary withdrawal from contracts that are financially damaging or no longer aligned to mission. Of course, unless the contract was originally correctly worded this might not be possible and the trustees, the charity and beneficiaries will face long hard agony. And indeed, withdrawal may cause problems for beneficiaries whilst being in the financial interests of a charity - unlike for many business providers, this is never an easy choice for trustees.
I have addressed in some detail the issues that a charity trustee should address when considering a major contract but the same principles and approaches should apply when considering possible mergers, take-overs (either way) or new services or activities - indeed any decision that might impact on the viability, reputation and mission of the charity. In the current political and economic environment, for many charities, this will very likely include the choice between advocacy and campaigning for changes to public policy and service delivery in order to mitigate the impact of some public policy.
Whatever the issue, like a non-executive director in the business or public sectors, the trustee as a board director has a clear legal and fiduciary set of responsibilities which she or he cannot discard or choose to ignore. However, above and beyond these responsibilities are the moral duty to the charity's beneficiaries and the values and mission. It is with this moral compass that trustees should navigate hard decisions but they need their radar, charts and an unerring 'nose' for and sense of right and wrong to guide them!