Is it time for a new model of charity governance?

May 24, 2017

KidsCompany

The recent news that the Government’s Insolvency Service has reportedly written to lawyers acting for Alan Yentob and other former Kids Company board members to warn them that it is minded to pursue disqualification proceedings against them, highlights the risks that charity trustees face and quashes the myth that their duties and liabilities are somehow lesser than those of their peers on boards in the private sector.

It also begs the question – are charity governance structures still fit for purpose?

In a damning report by MPs last year into the Kids Company’s collapse in 2015 they stated that there had been an “extraordinary catalogue of failures of governance and control at every level” and criticised the charity’s founder, Camila Batmanghelidjh, the other executives, the charity’s trustees and the charity regulators, the Charity Commission.

Under the newly harmonised ‘fit and proper persons test’ regimes charity trustees found to have fallen short in regard to their legal duties and responsibilities can also find themselves ineligible for future director roles in the private sector – if successful, disqualification proceedings could force former Kids Company chairman Yentob, for example, to relinquish his directorship of the television production business called I Am Curious, which he established last year.

And it is not just the collapse of Kids Company – mass resignations at the RSPCA, the investigation into fundraising methods following the suicide of 92 year-old Olive Cooke and criticism of commercial activities have shone a critical spotlight onto the activities of other high profile charities, with blame being put to a large extent on poor governance.

Two of the voluntary sector’s most prominent figures Sir Stephen Bubb, former Chief Executive of charity leaders’ network ACEVO and Sir Stuart Etherington, Chief Executive of charity umbrella group NCVO have said that the conventional trustee board model is not right for all charities and the sector should start thinking about a different form of governance for larger charities.

Addressing the question: Is Charity Governance in Crisis?, Bubb suggested that the traditional trustee board may not be effective for “those large organisations that have grown in size and structure so much that they almost resemble a new category”.

Although charities with over £100m turnover represent only 0.02% of the total number registered, they account for more than 18% of all charitable income.

Over the past 30 years in the commercial sector we have seen a sea-change in corporate governance, from the Cadbury report to the widespread adoption of the UK Corporate Governance Code, which has resulted in significant changes to board composition and boardroom behaviours.

This change in governance has not been mirrored by the voluntary sector. Oxfam treasurer Robert Humphreys has said: “The charity model at the moment I see as essentially being developed in the 19th century, in Victorian times, when a new wealthy middle class decided to set up trusts and foundations to address the problems they saw around them. That model, with trustees who are quite distant and not necessarily engaged, doesn’t stand well against the current focus on regulation, scrutiny and challenge.”

Earlier this year, the House of Lords select committee on charities’ published their report: Stronger Charities for a Stronger Society, The Lords committee was set up to look at charity governance and they concluded that good governance is fundamental and that charities need strong governance, with robust structures, processes and good behaviours to best serve their beneficiaries and their cause – this will be enshrined in the Charity Governance Code which is currently being updated.

Typically, most of the 200,000 plus registered charities in the UK are governed by a board of trustees, who may also be directors of the charity, who are volunteers, with no day to day responsibility for running the charity – they are therefore acting in a non-executive capacity.

The trustee/directors are also usually the members of the charity and if the charity is a company limited by guarantee they will act as guarantors for a sum as little as £1 each, as stated in the charity’s Articles of Association, which is only payable should the charity be wound up due to having become insolvent.

The most senior employer of the charity, who may have the title ‘Chief Executive’, is not usually a member of the board of trustees but attends board meetings as an observer.

This type of board arrangement contrasts with the unitary board structure adopted by listed commercial companies operating under the auspices of the UK Corporate Governance Code where there are equal numbers of executive and non-executive directors who all have the same legal duties and responsibilities.

The changes proposed by Sir Stephen Bubb and Sir Stuart Etherington would see the creation of unitary boards as standard for large charities, whereby their senior executives would become directors, with the introduction of payment for the non-executive directors/trustees.

Large charities Oxfam, Marie Curie and RNIB have backed this call for charities to be able to adopt a unitary board structure – Dr Jane Collins, Chief Executive of Marie Curie has said: “I’m sure it was fine years ago when the world was kinder perhaps, but now things are moving very fast. We have six meetings a year plus a two-day away day, so eight meetings a year. I can contact any of my trustees right away, but it’s not quite the same… I think a unitary board would be the way forward.”

Currently there is no reason why charity Chief Executives should not be director/trustees. As long as it is permitted by the charity’s Articles of Association and there is expressed permission from the Charity Commission then it can be done – and it does avoid the possibility of a charity CEO who regularly attends and participates in board meetings being considered to be a ‘shadow director’, having all the legal duties and responsibilities of a company director as set out in the UK Companies Act 2006.

Rachel Stancliffe, Chief Executive of the Centre for Sustainable Healthcare has been a member of the board of trustees since the charity was incorporated in 2011 – her status as a full-time paid employee of the charity and a director/trustee was approved by the Charity Commission when the charity was founded.

RNIB’s group director of resources Rohan Hewavisenti confirms that there is flexibility within the current charity structure; “We are now able to pay our trustees, even though it did take six months or a year to get that through the Charity Commission. And I think the unitary board structure is a really important one that trustees shouldn’t be excluded from having as an option.”

The rights charity, The Advocacy Project, has taken the decision to allow its Chief Executive, Judith Davey to join the trustee board. The 9 trustees took the decision on the basis of an independent report by consultancy Campbell Tickell, and a short presentation to the board by Rosie Chapman, governance consultant and former director of policy and effectiveness at the Charity Commission.

Campbell Tickell said that “on balance, we favour the inclusion of the chief executive on the board because it emphasises that responsibility for the success or failure of the organisation is shared by executives and non-executives. We have not found that it creates difficulties or conflicts of interest that cannot be managed with the right advice and careful preparation.”

The inclusion of the Chief Executive on the board of trustees addresses the apparently iniquitous situation whereby the person responsible for the day-to-day running of the charity has less responsibility in law than the unpaid trustees who may only meet as a board a few times a year – Camila Batmanghelidjh, the high profile head of Kids Company, was not a member of the charity’s board.

However, although it is possible and there are several examples of where it has happened, it is currently the exception rather than the norm to have charity Chief Executives on the board and charity trustees remain almost without exception, unpaid.

As with SMEs in the private sector, there is a recognition of the need for a pragmatic approach to the most effective governance structures for smaller charities but that does not rule out the unitary board which does not necessarily incur any additional cost and is probably no more than a recognition of what actually happens in the boardroom in practice.

Charity trustees do not necessarily need to be paid but they do need to be trained and made aware of their legal duties and responsibilities – and, despite the fact that they are volunteers, they should also be expected to attend and contribute to board meetings.

Along with a charity’s employees, trustees should also be set objectives and annually assessed on their attainment – they should be appointed for an agreed period, typically 3 years and members should take careful consideration when voting on trustees’ appointment and re-appointment.

There is also no reason why membership of the charity should not be expanded beyond the board of trustees – charity members attend the annual general meeting (AGM) and can vote on the appointment of trustees and the appointment of the charity’s auditors and they can and should hold the trustees to account.

There is no doubt that it is time to re-think charity governance not just for the large charities but for charities of all shapes and sizes The Victorian board of trustees may well still be appropriate for some charities but it is important that charities consciously choose a governance model that takes account of the significant improvement in corporate governance that has taken place in the private sector over the last 30 years and provides the right balance of challenge and support to make each charity a success and to avoid repetition of the public failings of charities such as Kids Company.

David Doughty is Chief Executive of Excellencia Limited, Chair of the registered charity The Centre for Sustainable Healthcare and Governance Consultant to the British Small Animal Veterinary Association.


How to become a Non-Executive Director – London 23 May 2017

May 12, 2017

Find out how you can obtain a Non-Executive Director position by booking a place on this interactive 1-day course.

non-executive director“A well structured and presented introduction to the responsibilities, challenges and attributes required of being a NED. It was thought-provoking. I have referred back to my copious comments in the comprehensive slide hand outs many times already”

Simon C Jones, Interim Transformation Leader and Hidden Value Discoverer

The How to become a Non-Executive Director course helps you to plan and prepare for your first NED position. It instils a real sense of what is expected of NEDs, and how you can meet the challenge.

This one-day interactive course is aimed at aspiring NEDs and covers essential knowledge about roles, responsibilities, strategy and corporate governance that are key foundations for a Non-Executive board role. It also considers up to date thinking on corporate governance and the responsibilities of owners, the board and employees.

This is followed by practical sessions on identifying NED opportunities, the process of obtaining a first appointment and performing due diligence before any position is accepted. There is emphasis on the importance of presenting your experiences with clarity and relevance.

This course identifies the various ways and circumstances in which non-executive directors can make an effective contribution to a board’s work. It also examines methods for their selection and reviews their motivation, induction and reward.

Who should attend?
Individuals who are currently a non-executive director; those seeking appointment as a non-executive director and those looking to appoint a non-executive director.

What to expect?

  • Clarifies how and why non-executive directors can strengthen a board
  • Provides practical guidance on how best to secure an appointment as a non-executive director

Course objectives
Participation on this course will provide you with the knowledge to:

  • Clarify the board’s role, purpose and key tasks
  • Appreciate the contributions that non-executive directors can make to the board in different types of company and situations
  • Recognise the qualities and experience needed to fulfil a non-executive director appointment
  • Appreciate appropriate methods for finding, selecting, appointing and rewarding non-executive directors
  • Understand the preparation required to interview for or be interviewed for the post of non-executive director

Course Leader: David Doughty CDir FIoD

David Doughty - Chartered DirectorThe course is delivered by David Doughty, a Chartered Director and highly experienced Non-Executive, Chief Executive, Chair, Entrepreneur and Business Mentor. David has extensive executive and non-executive experience in small and medium enterprises in private and public sectors. He is also a board level consultant to multi-national organisations and a Chartered Director Ambassador for the Institute of Directors. See his LinkedIn profile here: (https://uk.linkedin.com/in/daviddoughty)

Key Details
Duration: 1 day
Location:

Institute of Directors
116 Pall Mall
London
SW1Y 5ED 

Price
£330.00 (ex VAT)

Payment with Booking Price

£300.00 (ex VAT)

Partner Price*
£280.00 (ex VAT)

Book Now
To see course dates and to book your place now follow this link:

Course Registration
The fee includes lunch, refreshments and a copy of the course handbook

Attendance counts as 6 CPD hours of structured learning


*Discounts on Excellencia course fees are available for:


I’m an experienced NED but I’m not getting any new roles – what can I do?

May 12, 2017

CV Large

This is a question I get asked quite a lot – getting a foot on the Non-Executive Director ladder is difficult enough but it does not seem to get any easier once you have secured your first NED roles.

So how do you build on your NED, Governor or Trustee experience to create a Portfolio of NED roles?

The advice I always give is to start with your LinkedIn profile and look at what it says in your headline – that’s the strap-line that appears immediately below your name.

It doesn’t have to be your current or most recent job title, it could be something like “experienced Chair and Non-Executive Director” or “Independent Non-Executive Director” – something which most accurately describes your experience and what you have to bring to a board.

You may be one of the new breed of specialist NEDs so make sure that your headline contains your specialism such as “digital NED” or “sustainability NED”.

The next part of your LinkedIn profile to look at is the summary – make sure that every word earns its place in the one or two paragraphs which give a high-level overview of your skills, background and experience as a NED.

Make sure that the rest of your profile is complete and that your NED positions detail not only the type, size and sector of the organisation but also your role on the board, particularly if you were a member or chair of any board committees such as audit or remuneration.

Networking is a big part of securing your next NED role so it is a good idea to have some business cards printed which say the same thing as your LinkedIn headline and then get out networking and introduce yourself as a Non-Executive Director – the local IoD meetings are a good place to start but there are many other networks that are worth trying.

As there are usually many more NED candidates than there are jobs it is also a numbers game – so you will probably make a large number of applications and you will have to spend time on each one to make sure that you answer the questions posed in the job advert/specification and do some research on the organisation before writing your covering letter.

The increasing requirements for board diversity, whilst very welcome in terms of improving corporate governance, does mean that those of us who are “male, pale and stale” will have to work harder to be considered for new roles but if you take it seriously and spend time on your CV and covering letters then there is no reason why you cannot build a successful and rewarding NED portfolio.


Specialist NEDs

May 12, 2017

business-people-meeting-together l

There is a growing trend for Boards to seek specialist Non-Executive Directors

It used to be the case that a Non-Executive Director’s independence was their most desirable quality, these days, however, there is a growing trend for Boards to be looking for NEDs with a particular specialism especially where there is an obvious knowledge gap around the boardroom table in digital marketing or cybercrime for example.

Especially in sectors where technology or markets are evolving rapidly, it is vital for boards to be able to provide effective non-executive challenge to keep the executives on their toes and ensure that the business is seizing opportunities and not lagging behind the competition.

Specialist NEDs, particularly those whose specialisms are in one of the newer disciplines are also likely to be younger and from a more divers background than traditional Non-Executive Directors.

There is no need for the rise in specialist NEDs to threaten the non-executive nature of the role or the effectiveness of the unitary board as has been suggested by some Corporate Governance commentators – this trend is merely an expansion of the more common situation where a finance professional sits on the board as non-executive audit chair, to accommodate the rapidly changing environments most businesses operate in.

Specialist NEDs are more likely to keep themselves up to date with their subject than their fellow generalist NEDs on the board and are likely to command a premium in fees, especially in the newer and more sought after areas.

If you are a NED, or are looking to become a NED, with a background in Governance, Sustainability, Solvency, Digital, Remuneration or Start-ups, for example, then you should make sure that you highlight your specialism on your CV and LinkedIn profile


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