Craig Dearden-Phillips: Charity governance is broken - and here's how to fix it

The independent leadership adviser says we have to admit there are problems, then change our ways, including allowing charities to pay trustees

Craig Dearden-Phillips
Craig Dearden-Phillips

I do not know of a single senior charity executive who would say this in public, but I do know a few who privately think their board is an impediment to the organisation’s mission. This, of course, isn’t expressed as a desire to operate without a board at all, but as a desire for a better board: smaller, better qualified, more diverse and more conscientious in carrying out its duties.  

As the 2020s approach, we have to question whether the trustee model of governance is at the end of its useful life and what needs to change. Three problems really stick out.

The first is that boards generally comprise only voluntary trustees. Unlike in business, our boards exclude senior charity staff, including the chief executive, who are not legally responsible for anything the organisation does. In complex organisations where the chief executive and senior team are probably better placed than the non-executive board to see the risks facing the
organisation, it seems odd that they do not share in fiduciary responsibility.

The second problem is board diversity. The Charity Commission’s recent report Taken on Trust pointed out that trustees were disproportionately retired professional men – typically sixty-something accountants and lawyers. This is no accident. These people bring massive talent and experience, but they also have the tendency to reproduce boards in their own image. In short, they bring in their friends.

The board recruitment process in 2018 remains far too informal. Is it therefore any wonder we have a problem with representation on our boards when the selectorate is so homogeneous?

The third problem is capacity. Trusteeship is a serious, non-executive role that needs time, training and sometimes, yes, money to do properly. I constantly run into boards where half the trustees are seldom seen, or where those that turn up clearly haven’t read anything and just sound off as they see fit. This isn’t good enough. It means governance is a weak link in a sector with many
future challenges.

Admit the problems

So what’s the solution? It starts with admitting there are problems. The charity sector can, at times, have a blob-like mentality when it comes to the way it works. Challenge is viewed as something hostile, to be repelled. All the problems and risks associated with change have been presented as reasons to carry on as we are. We have to be prepared to change our ways.

The next part of a solution is to make some simple changes to charity law that will allow senior officers to be co-opted onto the board of a charity upon appointment. This will give us unitary, single boards comprising the senior management team plus a small number of trustees, rather than executive boards running alongside large, often under-resourced groups of trustees. Chief executives and their teams will at last be fully responsible by law for their actions.

Further measures include making it mandatory for charities over a certain size – those with incomes of more than £100,000, say – to advertise all trustee vacancies and to report on the make-up of their boards in their annual returns to the Charity Commission. The commission itself, backed by government, should embark on a campaign to encourage younger people, less qualified people, disabled people and people from minority ethnic groups to step forward as potential trustees.

There should, for all trustees, be a formal register, available accreditation and online training, linked, if people want it, to a valued qualification, just as there is for any responsible role. Trustees should not be scratching their heads when it comes to the basic questions of board responsibilities and duties.

Pay trustees

And finally, boards need to be going to the Charity Commission to ask for exemptions to pay trustees who are financially excluded. If you want a single parent living in a high rise to give up to 20 days a year to sit on your board, where do you think she will find the money to fund that? Again, we need to use all the means available to elevate trusteeship beyond being a middle-class hobby and include those who can’t otherwise do it. This doesn’t mean paying all trustees – that would be expensive and unnecessary – but it does mean paying people who otherwise need to clean, cook or drive taxis to feed their families.

Some would argue that this approach would take the voluntarism out of the voluntary sector – but it won’t. At the moment, the voluntary sector is not accessible to most people. From the outside, it looks like a closed shop. That perception is what we have to change first.

Many of our top charities are now complex commercial ventures that suffer badly if the wrong governance model is applied, or if trustees don’t know what they are meant to be doing. The inability of many charities to adapt to the digital agenda, or engage in mergers and commercial development all too often comes back to a highly amateurish model of governance.

Various reviews of the sector are currently under way, but will any of them tackle the issue of charity governance? I hope so.

It takes a good deal of courage and humility to accept that something is broken and try to fix it, especially given that the results aren’t totally predictable. But not changing charity governance poses a far greater risk than changing it.

Craig Dearden-Phillips is an independent adviser to chief executives and boards and leads Social Club, a new network of social purpose leaders

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