At Which?, the business tail is wagging the charity dog

The news about the six-figure bonuses for a few senior executives will be taken as further evidence of a charity world gone wrong, writes the editor of Third Sector

Stephen Cook
Stephen Cook

Four years ago, top pay in charities was not the sensitive issue it has since become; and 2012 was the year when the Consumers' Association, the charity with the trading subsidiary comprising the Which? stable of publications, began the first of its long-term incentive schemes for its senior executives.

But nowadays senior salaries in charities are something of a hot potato: starting in 2013, the national press began to draw attention to the high salaries in some charities, especially those that drew most of their income from public money or fundraising from the public. Third Sector has published and updated analyses of salary levels in the biggest charities.

The National Council for Voluntary Organisations has also conducted an inquiry that recommended greater explanation and transparency, and the Charity Commission, while emphasising that pay was a matter for trustees, has drawn attention to the potential reputational risks. Politicians have made disapproving noises.

All this has no doubt played a part in the cagey way the CA responded to inquiries by Third Sector about the bonus scheme, following evidence of concern by some of the charity’s members. It repeatedly declined to give an interview or explain the scheme fully, saying more information would be produced "imminently".

However, it was clear from earlier annual reports and the limited responses from the charity that Peter Vicary-Smith, the chief executive, was going to be paid something approaching £1m in the current year. Third Sector magazine went to press on Monday with an article saying so.

The following day the charity published a mid-year review – the first time it has done this – which revealed that Vicary-Smith was receiving £819,000. Two other executives are receiving  £722,000 and £606,000 respectively. The Times newspaper was given the review in advance of other media and had the story to itself on Wednesday morning.

It is not clear what the charity hoped to achieve by playing it like this. The Times did not give it a particularly sympathetic ride, although it drew attention to the fact that the CA earns all its income rather than taking public money or fundraising – had it been pumping the elderly for a living, it would no doubt have been slaughtered. The following day the Daily Mail weighed in with familiar invective about fat-cat salaries in charities.

So why the unprecedented mid-year review? Because we wanted to be transparent, the charity says. Well, it certainly hasn’t been very transparent with Third Sector, even though this is a specialist publication that treats the sector with more understanding and restraint than the right-leaning nationals. And why this sudden apparent need to be transparent? Nothing to do with our inquiries or the imminent article, the charity asserts.

All that’s as may be. Suffice to say that the bottom line of this episode is that it just looks like greed and is likely only to intensify the attacks on charities and the sector’s struggling reputation among politicians and the public at the moment. Which? is now going to join the lengthening list of offenders cited by the backwoodsmen as evidence of a charity world gone wrong.

So has the CA gone wrong? On the face of it, no. It is a charity with a successful trading arm that donates its profits to the charity, which then spends £12m a year on charitable activities such as campaigning for the rights of consumers and offering them free advice. This is a common arrangement and, strictly speaking, there is nothing wrong with it. The CA qualifies for £2m a year in tax breaks.

What appears to have happened here, however, is that the trading arm has, in effect, become so successful and dominant that it has taken over control from the charity. The ethics and values of the charity world appear to have been elbowed out by some of the less attractive values of the business world, where bonuses and incentives and personal reward – not to mention unequal pay – are dominant. The tail is wagging the dog, and it is not a pretty sight.

The CA is not alone in this. There are many other charities that are, in effect, big businesses, run according to business principles. Nuffield Health is another example. Because they earn their living rather than raising funds or using public money, high pay for their chief executives tends to attract less opprobrium from commentators. They also escape censure partly because they do not look like charities, few think of them as charities and fewer know that they are charities, receiving significant tax advantages. If they were chugging or mass-mailing the public, as mentioned above, it might be a different story.

Everyone knows that we have got to a point in this country where the concept of charity and its boundaries have become hopelessly muddled and worthy of a complete reassessment from the ground up. It is hard to predict whether the continuing accumulation of controversies such as this will result in such a reassessment being undertaken or whether the good ship charity will just continue lurching and plunging through the heavy seas as best it can. On balance, the latter seems more likely.

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