Analysis: Trustee payment - when is it right to remunerate?

As the trustee payment debate rumbles on, Stephen Cook asks how many charities actually do it and Mathew Little hears four of them give their reasons for paying board members

Trustee payment
Trustee payment

One of the unknown factors in the current debate about trustee payment is how many charities actually do it. But figures from a major governance survey in September suggest that there might be at least 80 UK charities that pay.

The survey, carried out by the consultancy Compass Partnership and Cass Business School, received responses from 228 of the country's largest 500 charities. One in seven respondents said they paid their chairs and one in 10 their trustees.

If the overall figure of one in six that paid is applied to the entire 500, and if it is assumed that few smaller charities pay their boards, the figure of 80 emerges. The survey showed that the amounts paid varied from less than £5,000 to more than £15,000 a year for an average of 29 days.

The Charity Commission does not keep a list of charities that pay trustees. But so far this year it has dealt with 54 cases involving trustee remuneration, including payment for services, expenses and payment for loss of earnings. Seven cases concerned payment for acting as a trustee, of which five were successful and two are pending.

"We receive very few applications from charities to change their governing documents to allow them to pay trustees, and anecdotally the figure is very steady from year to year," says a spokeswoman.

The figures are of interest in the debate following Lord Hodgson's recommendation, in his recent review of the Charities Act 2006, that charities with annual incomes of more than £1m should be allowed to pay trustees without gaining permission from the commission to change their governing documents.

The review said it found no indication that payment helped charities recruit and retain trustees, but did not address whether it brought about improved governance. The Compass report found that the link between remuneration and better board performance was "weak" and that the presumption against payment should therefore remain.

But it also found that remuneration was linked to higher attendance at meetings: 91 per cent of charities that paid trustees achieved 80 per cent attendance levels, compared with 70 per cent of those that did not pay.


5 - The number of charities that applied successfully to the Charity Commission in 2012 for permission to pay one or more of their trustees

£137,290 - The amount paid in 2011 to Sir William Castell, chair of the Wellcome Trust, which funds scientific research: his deputy, Peter Rigby, received £102,968


CfBT Education Trust

The trust has an income of £131m and employs 2,400 staff worldwide. It has a contract with Ofsted to inspect a third of schools in England, and sees itself as a social business. Since 2007 it has paid five of its 12 trustees, including the chair, and they each receive £350 a day, resulting in annual payments of between £10,000 and £12,000. The full board meets quarterly but paid trustees also chair committees, which meet frequently.

Neil McIntosh, chief executive of CfBT, says trustees take business risks and travel abroad: one, for example, chairs a board that deals with Middle Eastern activities and government contracts. "We have expectations of them - we feel we don't have to worry about bothering them because they are remunerated and expect to be bothered," he says.

He says an unpaid trustee body, meeting four or five times a year, "is not sufficient to keep tabs on the speed with which we have to move to satisfy a competitive marketplace". An unpaid trustee board is often, unavoidably, little more than a rubber stamp, he says.

The trust's seven unpaid trustees currently act as "guardians of the mission", says McIntosh, but the charity is setting up a committee, drawn from its 80 individual members, that will take over that function and have the power to recall trustees.

"I think some safeguard is needed that is best supplied by an unpaid group," he says. "The desirable thing is to divide the tasks of trusteeship and guardians of the mission."


Richmond Fellowship

The fellowship, one of the biggest providers of mental healthcare in England, has seven non-executive directors, each of whom are paid. The chair receives £12,500 a year, the chair of the charity's audit and insurance committee is paid £8,000 a year and the remaining five non-executive directors earn £5,000 a year each. The charity is also a housing association - payment of trustees is more common in the housing sector.

Some members of the charity resigned in protest when the decision to pay trustees was made five years ago, according to Mary Shearer, the charity's head of governance. "Not everybody was supportive," she says. "Some people felt that the emphasis should be more on the charity side, where it is much less common to pay trustees. We felt we needed to ensure that we secured a sufficient number of directors of the quality needed to run a big organisation."

The charity used to have a 20-strong unpaid trustee board, but as part of the reorganisation the fellowship's paid directors all joined the board, alongside the seven paid non-executives.

The full board meets quarterly, but each non-executive director has an area of responsibility and attends strategy meetings and advisory subcommittees. For example, the chair, Peter Corley, a retired financier, "provides support and feedback and a sounding board for the finance director", according to Shearer. "There is a very good commitment on the part of the directors, not just to sit on the board but to go into all other aspects of our operation."


The Wellcome Trust

The Wellcome Trust is the UK's largest non-governmental funder of scientific research and spends £600m a year on biomedical research and public engagement. It was created in 1936 by the American pharmaceutical magnate Sir Henry Wellcome, whose will explicitly said that trustees should be paid.

Sir William Castell The current chair, Sir William Castell (right), was paid £137,290 in 2011 and his deputy, Professor Peter Rigby, received £102,968. Other "governors", as they are called - including the former director general of MI5, Baroness Eliza Manningham-Buller - were paid £68,645 each. The sums increase each year in line with salaries in the senior civil service.

Simon Jeffreys, chief operating officer at the trust, says trustees are paid because they put in even more time and effort than non-executive directors in the private sector. He says they spend at least 30 days a year - and the chair considerably more - on trust activities such as visiting overseas projects and assessing grant applications.

"If someone asks us for £1m to investigate malaria, it's not an officer of the trust who sits down and decides whether an award will be given," says Jeffreys. "We bring together a panel of experts, including trustees, who very methodically evaluate the grant application. It's wholly appropriate to provide remuneration for the very significant amount of time they give up." He says the pay is a factor in motivating people to join the board, but "the principal drive is the mission of the trust".


RNIB

Kevin CareyThe UK's largest charity for blind people paid its chair, Kevin Carey (right), £24,000 in 2011 for three days a week to cover lost earnings from his job as an IT consultant. The chief executive, Lesley-Anne Alexander, says the policy of compensating blind or partially sighted trustees for loss of earnings - Carey is blind - does not apply to fully sighted trustees. "The reason that we compensate our blind or partially sighted trustees is that only a third of blind people of working age have jobs," she says. "It would be counter-productive if somebody who was blind or partially sighted had a job and had to give it up to be a trustee."

Alexander is also unpaid chair of the chief executives body Acevo, which backs trustee payment on the grounds that it attracts a broader range of candidates and removes economic impediments. She says the RNIB has decided that boards should be able to pay trustees if that is right for them and might do so itself once the position becomes more clear. "It's not what we do at the moment because we recognise that this thinking is in its infancy," she says. "But we would welcome a climate where paying trustees became not the norm, but more accepted than it is at the moment.

"If charities are serious about wanting service users and customers to drive their businesses, you have to find ways of facilitating that," she says. "Lots of charities work with people from excluded communities and very often it's poverty that excludes them. The days of the landed gentry who have got time to do charity work are long gone".

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