This document summarizes a discussion on whether CEOs should serve on the boards of charities. It begins by outlining the traditional model of separate boards and management, and defines a unitary board as one composed of both paid employee trustees and non-executive trustees. Both models are debated, with unitary boards argued to improve governance and performance but also raising concerns about conflicts of interest. The document then covers legal issues regarding paying trustees, obtaining charity commission consent for changes, and examples of safeguards for conflicts when using unitary boards. Speakers shared reflections on focusing on charitable impact over governance models and valuing both executives and non-executives as a team.
2. 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
3. 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)
4. 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)
5. 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?”
6. 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.’
7. 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
8. 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
9. • 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
10. 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.
11. 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?
12. 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
13. 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.
14. 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.
16. 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.”
17. 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.
18. 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;
19. 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.