Why only have one model of charity governance?

In recent months, I have seen an increasing number of posts raising concerns over the present model and practice of charity governance. As someone who has worked in the sector (almost) my whole career and served in both exec and non-exec roles, I hope my thoughts will contribute to this discussion.

As others have said, the volunteer-trustee governance model originated in the 19th century. Indeed, arguably, it’s one of the last vestiges of a Victorian culture where the social superiors were seen as best placed to govern everything in society.

Today, this means that although we call charity executives ‘directors’, the trustees are the directors in the legal sense and ultimately responsible for its operation. They have, to quote, the Charities Act, ‘independent control over and legal responsibility for a charity’s management and administration’. This is despite the fact that they are frequently less expert in the charity’s work than the executives and are expected to undertake these unpaid roles in their own time and alongside  other responsibilities.

In reality, especially in large, complex charities, the executives make many of the strategic decisions, including those with legal implications, as this is the only practical way to run the organisation.

I think it is difficult to disagree that the governance structure we have inherently encourages a sense of ‘us and them’ and a power in-balance. Obviously, it’s true that in some charities there is no great division between trustees and the executive. But much too often there is and major problems can result. And the point is that the system enables, even encourages such divisions, not inhibits them.  

This is not to question the integrity or commitment of most trustees. I see this in many of the organisations I work with, for example hospices. Here trustees are responsible for multi-million pound organisations, delivering a range of highly important and complex public services in an increasingly regulated and challenging environment. Quite a responsible role. And many do a great job. But, the sheer scale and range of duties means that to do the role effectively involves a significant time commitment.

I’m not suggesting that the present model of governance is totally abandoned. Some organisations may be happy with it. And for the large number of charities with no or very few employees, it’s probably quite appropriate.

What is frustrating is the lack of choice, the lack of flexibility. The charity sector is as varied in size and scope as the corporate one. But companies of different types have different governance structures. For example, many SMEs don’t have non-Execs.

However, charities are all expected to operate with a one size fits all model. They should have a choice. For example, to have a unitary board of directors (in the legal sense), including executives and non-executives. This would certainly help enable more sense of ‘one team’ than the present model does. 

Ironically, they can already do this with their wholly owned trading companies, where it is common for the charity trustees and executives to be joined as the company directors by external people. So, a CEO can be a director in a legal sense of a company that, for example, runs the charity’s retail operations. But not of the charity itself.

We saw the advantage of a unitary approach during the early months of the pandemic. The need to make important strategic decisions in a rapidly changing environment at speed became clear. The normal way of working was too slow and cumbersome. So, many charities set up a pro-tem combined trustee and executive group with the power to act quickly and then report back to the wider Board.

One of the statements often made during the pandemic was that ‘the world has never changed so quickly, but will never change so slowly again’. Subsequent events show this had some veracity. But most charities have moved back to their old way of working.  

This principle of choice should extend to paying trustees / non-executives, if there is a good case to be made for this. This can and does happen, but in relatively few cases, normally requiring Charity Commission approval. I have never understood why it is ok to be paid if you are a non-exec of an NHS Trust, but not of a charity delivering health care services?

In some cases, this may add a stronger degree of accountability, especially if it involves a specific time commitment. In other cases, it may allow involvement of people who have the lived experience the charity needs to learn from, but who can’t afford to give their time. Not everyone will like it. But it's about allowing choice, not personal dogma.

At present, it appears that the Charity Commission (est. 1853) is, at heart, committed to the present model, with grudging acceptance to allow changes when individual charities strongly press for them.

Obviously, no system of governance can guarantee that a charity will be successful. But only having one system of governance limits the chance of success.