a6: should your ceo be on the board? different thinking about charity governance
TRANSCRIPT
Drinks sponsors:
Partner sponsor:
Lead sponsor:
Media partner:
Tech partner:
SHOULD YOUR CEO BE ON THE BOARD? DIFFERENT THINKING ABOUT CHARITY GOVERNANCE
SPEAKERSSUE KILLEN VICE CHAIR, CLARION HOUSING; CHAIR, CLARION FUTURES AND FORMER CEO OF ST JOHNS AMBULANCE
THEA LONGLEYPARTNER, BATES WELLS BRAITHWAITE
OVERVIEW
• Legal backdrop (Thea):
• default position
• unitary boards – what are they?
• legal ability to pay trustees
• changing your governance structure
• Unitary Boards - examples and reflections (Sue)
• Discussion/Debate
WHAT IS THE NORM?
Traditional charity board:
• the trustees are unpaid, non-executives
• employees/management report up to the board of unpaid trustees
• (some charities also have varied membership structures)
HOW IS A UNITARY BOARD DIFFERENT?
Charity board is instead made up of:
• paid employees of the charity (Executive Trustees)
• trustees who are not employees of the charity (Non- Executive Trustees)
UNITARY BOARDS IN THE MEDIA – THE
DEBATE
• BBC moved to a unitary board in April 2017:
“It is argued that a unitary board, made up of mostly non-executive directors and a chair, would help rule out such scandals as that which engulfed Newsnight and toppled BBC director general George Entwistle in 2012”(from The Guardian, opinion Monday 14 March 2016)
• Headline, Governance & Leadership magazine, May 2017:
“Is it time for an update of the charity governance model?”
UNITARY BOARDS IN THE MEDIA – THE
DEBATE (2)
• Personal opinion of RNIB’s Kevin Carey, in essay for NPC published July 2017:
‘I think the default for the governance of major charities should be unitary. It helps avoid the farce of the executive team not telling and the non-executive board not knowing; the executive team doing all the crisis management and the non-executives turning up once a quarter to smile at a crisis averted or to pick up the pieces.’
EMPLOYEE -TRUSTEES: HOW COMMON IS
IT?
• Charity Commission research 2008 showed 13 out of top 100 Charities paid executive trustees
• Charity Finance magazine (October 2017), state that 18 of the UK’s top 100 charities pay one or more of their trustees.
• A Campbell Tickell report indicates that, in 2015, 14 of the top 20 HAs had unitary Boards
WHY HAVE A UNITARY BOARD?
• Improved governance: it may bring clearer strategic thinking by having the individuals responsible for strategic and operational decisions working together with equal accountability and responsibility.
• Increased charity performance: creation of a dynamic mix of expertise and experience and engagement of executive in strategic direction of the charity may improve charity management.
• Increased transparency: by the board’s early involvement in development work.
• Faster decision making: resulting from individuals working alongside each other in developing and pursuing defined outcomes
ADVANTAGES
• Negative impact on funder/donor relationship: there may be less willingness to support a charity with paid trustees.
• Negative impact on governance: disparity of operational knowledge between the executive and non-executive trustees may affect decision making.
• Employee-trustee conflict: where employee-trustee is conflicted the whole trustee body cannot make a joint decision and may not be able to be held jointly responsible for their actions.
• Increased executive trustee power: dual role of executive trustees may mean they have undue power and influence over the administration and strategic direction of the charity. There may also be confusion of roles.
• Stricter treatment from Courts: paid trustees are more likely to receive harsher treatment from the Court when in breach of duties.
DISADVANTAGES
DEFAULT PAYMENT PRINCIPLES
A trustee must not profit from his/her role
• Can be reimbursed actual expenses.
• Cannot be paid: salary, honorarium, pay in lieu.
Exceptions:
• Where the charity’s constitution permits the payment.
• Where the payment can be made using a power in the Charities Act 2011.
• Where the Charity Commission (or the Court) authorises the payment.
MOVING TO A UNITARY BOARD
Consent to change the charity’s constitution is likely to be needed
CC “We will only grant authority where the trustees have satisfactorily covered all the points on the form, or, if they have not, where the reasons they have given for this are convincing”
Online application form:
• Which employees will serve as trustees?
• Is this a one off approval or an on-going power for future post holders to be trustees?
• Why is it in the charity’s best interests for the employee to be a trustee and why can’t the employee simply attend as a non-voting advisor?
• How will conflicts of interest be managed?
OBTAINING CONSENT
The Commission will want to see that a charity has a formal Conflict of Interest Policy in place. As a minimum this should include provisions requiring:
• Employee-trustee to be excluded from any discussion that might affect their employment (directly or indirectly).
• An up-to-date register of trustees’ interests to help recognise conflicts.
• That the trustees declare any personal interests associated with an agenda item at the start of a meeting.
CONFLICTS OF INTEREST
SAFEGUARDS (1)
The trustees should be satisfied that:
• Employees go through an induction process where roles and responsibilities of trustees are defined and explained;
• The proposed appointment, taken together with other payments already received being made to trustees will not result in more than half of the trustees receiving any benefits of any kind from the charity either directly or indirectly. In practice BWB has obtained consent for over half and up to all trustees (mix of exec and non-exec) to be paid in particular circumstances e.g. all trustees share the responsibilities and the drivers for payment apply equally across the board; and
• The unpaid trustees will be able to form a quorum to carry out the business of the charity without any conflicted trustees.
SAFEGUARDS (2)
Remuneration Committee
• Evidence of independent decision making in relation to remuneration of trustees.
• Composition: At least 3 members, preferably independent non-executives. Can have persons other than non-execs where committee is determining remuneration of non-execs.
• Responsibilities: setting remuneration levels for executives and Chair.
• Remember: seek independent advice, especially where deciding level of remuneration for non-execs.
OTHER CONSIDERATIONS
• Contracts of Employment
• Trustee insurance
• Removal:
• as an employee
• as a trustee
REFLECTIONS
Charity Governance and Leadership should focus on maximising charitable impact not steady state;
Little objective evidence of best way of achieving this;
Most other sectors have unitary Boards. Most Trustees come from these sectors;
Good people can make any system work –Governance model should be there to provide a steer in “real world.”
2 MY EXPERIENCE
• “Paid staff”, treated as “the hired help”;
• Trustees not feeling valued or well used;
• Charities treading water or drifting into problems;
Dynamic teams where the key executives and non-executives work together with a clear sense of purpose and respect offer the best hope of achieving successful charitable impact.
IT’S NOT ABOUT THE MONEY
• Need to move away from focus on money and power and focus on effectiveness;
• CEOs don’t need to be paid extra to join the Board;
• small payments to non execs can increase diversity;
Charities vary hugely in size and complexity; governance model should be permissive rather than one size fits all;
INDEPENDENT VIEWS
“On balance we favour the inclusion of the Chief Executive (and often the FD) on the Board, both because it implies a strategic role for the CEO and because it emphasises that responsibility for the success of the organisation is shared by executives and non-executives.” Campbell Tickell briefing 2015.
“Its blindingly obvious the CEO should be on the Board. I want the CEO to have the same legal accountability as me.” FTSE 100 and charity Chair.
DISCUSSION AND QUESTIONS
