I worked in the private sector for many years and only recently moved into the charity sector. The differences in corporate governance have been striking.
In the private sector the directors take strategic decisions and are held accountable for them by shareholders. By contrast, in the voluntary sector this link between decision-making and legal accountability is split between chief executive and trustees. This vests significant responsibility in the chief executive and divorces trustees from the detailed discussions that underlie and inform any strategic decisions.
Does this matter? When things go well it may not, but good corporate governance is about the checks and balances charities have in place when things go wrong. Some are to do with the quality of information that is fed to trustees. In the corporate world the chief executive, who is ultimately accountable, and board members will have an opportunity to hear different, sometimes opposite views, which should inform the quality of the eventual decision.
For trustees, understanding the quality and range of debate by the senior management team on controversial or difficult recommendations is often as important as the papers presented for ratification. Given how far removed trustees can be from the day-to-day issues, relying only on committee papers may not always give them a true perspective on the range of opinions within senior management.
As an ex-trustee of charities, I had often wondered how senior management had arrived at the recommendations trustees were being asked to ratify.
For me as a trustee it was often difficult to assess whether all the issues had been adequately taken into account by senior management.
Is there a solution that does not involve blurring the distinction between governance and executive responsibilities? Maybe senior management should sit in when trustee committees or honorary officers meet - and maybe they should even have voting rights. For this to be effective, the culture should encourage healthy debate and respect for different views.
Implementing Sorp 2005 will move charities towards even greater transparency and accountability. In keeping with this change in ethos, incorporating senior management in the governance of charities would help with this process.