The Charity Commission should rethink its guidance on the payment of trustees as part of a series of regulatory reforms needed to stop trustee boards from "coasting" rather than focusing on having the greatest impact, according to the think tank NPC.
In a new paper It starts from the top, which was published today, NPC argues that the commission actively discourages boards from paying trustees and says it should instead invite charities to make the case for remunerating their boards where this is appropriate for better governance.
This would be good way of enabling charities to attract a more diverse board membership, it says.
"NPC would argue that it should be up to individual charities to make this decision," says the paper "But it is crucial that this is done not as a way to hire expensive people who are already very wealthy. It must be used as a way to help charities attract and compensate a wider range of people with more diverse skills who may not be able to afford to the hidden costs - including precious time - of being a trustee."
NPC also says in the paper that the commission should demand more feedback from trustee boards at the largest charities to check how they are performing.
It says the regulator should make it a requirement in the Statement of Recommend Practice that large charities provide details on their impact as well as their financial standing in their annual reports. "At the very least this should include updates on what a charity has achieved in a given year, how this compares with the year before, and what is included in future plans," it says.
Annual reports also should include details from large charities on the training and evaluation their boards have undertaken to develop their work and remain effective, it says.
The paper also calls on the Office for Civil Society and Innovation to consider giving the Charity Commission the power to sanction charities that repeatedly breach these extended requirements.
It also recommends a greater role certifying the quality of boards for organisations with "expertise and gravitas" like the Institute of Directors.
Iona Joy, head of the charities team at NPC and co-author of the paper, said in a statement: "The Charity Commission has a key role in getting the most out of trustees. It’s important to get the right balance between the carrot and the stick, but ministers should certainly look at extra powers for the regulator if charities repeatedly fail to provide the sort of information asked of them."
The paper says charities would need to be consulted before any of its proposals were put into action to ensure that any extra administrative burden was proportionate to the size and mission of the organisations affected.
A spokeswoman for the commission said: "We welcome NPC’s contribution to the ongoing debate on how to improve public trust and confidence in charities. The Charity Commission has published an action plan on charity governance and we will carefully consider NPC’s proposals over the coming weeks.
"The current Sorp, which applies to large charity accounts from 1 January 2015, goes much further than the previous one in encouraging charities to demonstrate the difference that their activities have made in their annual reports. There is an ongoing consultation on the charity Sorp and we encourage those with views to respond to the open consultation."