NEWS IN FOCUS: Charities deeply divided on issue of paid trustees

Patrick McCurry

With a growing band of charities being run along the lines of commercial companies, calls are growing for trustee boards to include paid executives. But not everyone agrees. Patrick McCurry joins the debate.

Sir John Brigstocke, chief executive of the charity St Andrew's Group of Hospitals, runs a multi-million pound organisation with a board made up solely of volunteer trustees.

But he, like some other chief executives of big charities, has become increasingly frustrated with the traditional governance structure in charities, which he sees as outdated. He wants the chief executive and some other senior directors to be given full voting rights on trustee boards, although voluntary trustees would still be in the majority.

"We have a £70m turnover and provide 600 beds to the NHS. For all practical purposes we are run like a business, so it would make sense for us to have a similar governance to a commercial company," he says.

The Northampton-based charity is not alone in its desire for change, if a survey by charity chief executives' association Acevo is anything to go by. In the poll of more than 300 chief executives and board chairs, Acevo has found that a small majority is in favour of mixed boards of volunteer trustees and paid executives.

Increasingly complex

The debate centres around the fact that the bigger service charities have become increasingly complex organisations with huge turnovers. They argue that they need board structures that are along the lines of commercial companies so that senior managers are more tied into the decision-making process.

But some organisations, including NCVO, are strongly opposed to the idea.

"Since 1601, charity trustees have been unpaid volunteers who oversee the strategic direction of the charity and act as impartial stewards," says Tesse Akpeki, head of NCVO's trustee and governance team.

She adds: "Any relaxation in the rules governing membership of charity boards would undermine the voluntary sector ethos of dividing the management of charities and their governance."

It is possible for charities to appoint chief executives or other paid staff to trustee boards, but they must first get approval from the Charity Commission, which is difficult in practice. Less than 5 per cent of chief executives currently sit on their boards.

Andrew Brown, vice-president and former chair of conservation charity BTCV, says trustees should be given the power to decide for themselves whether their chief executive or other directors sit on their board.

"Commercial companies have a mix of executive and non-executive directors on their boards because they realise that they need people who really know what's going on in the organisation to take decisions on strategy.

Common ground

"There's a strong argument that big service charities have a lot in common with commercial companies and may well benefit from having senior staff on their boards, although it would probably not suit many smaller charities."

Brown says BTCV considered an attempt to get its chief executive on the board a few years ago, but did not apply to the Charity Commission for permission. "The legal advice we got was that we would be unlikely to get approval from the Commission because it would require an incredibly exceptional case," he comments.

Conflict of interest

A spokeswoman for the Commission said: "We judge applications on a case-by-case basis. We must take into account the fact that once a paid member of staff joins a board he or she faces potential conflicts of interest and also becomes a paid trustee, so the charity must make a strong case before we authorise it."

Acevo chief executive Stephen Bubb says his organisation is not necessarily for or against a relaxation in the rules on board membership. Instead, the association hopes to stimulate debate in the sector with a report on governance, to be published in December at Acevo's winter conference.

Bubb points out that many housing associations are now big businesses with large turnovers and are following the commercial model of mixed boards.

Bubb adds that Professor Bob Garratt, visiting professor at Imperial College Management School and an expert on corporate governance, has made scathing criticisms of charity board structures.

"Professor Garratt was on one of our working parties looking at charity board governance and he has criticised what he sees as the innate conservatism of charity trustee boards," says Bubb.

Linda Laurance, chair of the Charity Trustee Networks, which supports charity trustees and aims to improve governance, says there is a wide range of views among chief executives on the issue.

"There is no widespread consensus and we need more research on this topic," she says. "For some larger charities it may be appropriate to have chief executives on their board, but for others not.

Accepting responsibility

"One concern of chief executives is being put in a position where they have to accept the responsibilities of trustees. Most are happy to have responsibility for management, but not necessarily governance as well."

This view is echoed by NCVO's Akpeki: "I think most chief executives would see membership of the trustee board as an added burden and I can't see what extra value it would bring."

But Bubb questions whether, given the huge diversity in the voluntary sector, a "one-size-fits-all" policy is still appropriate.

One obvious issue in all this is the potential conflicts of interest that would face a chief executive who also sits on the trustee board.

These could include not just the chief executive's salary and terms and conditions of employment but other issues, such as voting on departmental budgets.

Bubb shrugs off the conflict of interest argument: "The system of mixed boards seems to operate pretty well in the commercial world, and housing associations see enough benefits to be moving that way too."

Despite the growing debate on board structures, there seems little prospect that the Charity Commission will relax its stance in the short term. And Akpeki argues that if charities are having problems with their boards, there are other options to consider.

"If a chief executive is not getting the full support of the board, you need to ask why. The solution could include more training for the board members or perhaps making sure the trustees understand their role and responsibility better.

"Other options are tightening the skills of the chair or getting rid of 'dead wood' on the trustee board."

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