October 2017 - Charity Governance Code

Charity Governance Code

A new edition of the charity sector’s Governance Code has recently been published. The Code has been in existence for 12 years and this new edition has been drafted in the light of the particular challenges that some charities have faced recently and the role of good governance in averting them. The Code’s focus is on attitudes and culture, about ensuring a charity puts its values into practice. It is intended to help trustees understand the environment in which they operate and consequently to make better decisions. The drafters say that the Code’s principles, rationale and outcomes are universal and apply equally to all charities, whatever their size or activities, however, there are separate versions to guide smaller and larger charities. Whilst the Code has been published for charities in England and Wales it is likely to be of use to all charities and for other not for profit organisations.

The Code starts with a ‘Foundation Principle’ that all trustees:
• are committed to their charity’s cause and have joined its board because they want to help the charity deliver its purposes most effectively for public benefit
• recognise that meeting their charity’s stated public benefit is an ongoing requirement
• understand their roles and legal responsibilities, and, in particular,have read and understand
o the Charity Commission’s guidance The Essential Trustee (CC3)
o their charity’s governing document
• are committed to good governance and want to contribute to their charity’s continued improvement.

There are then a further seven principles, the key points of which are summarised below –

Organisational Purpose: The Board should determine the purpose, develop strategy to achieve it and be able to explain the charity’s public benefit. The Board should evaluate and review on a regular basis; this should not just look inwards but should recognise the charity’s broader responsibilities: communities, stakeholders, wider society and the environment.
Leadership: The Board should provide oversight and direction to the charity and support and constructive challenge to the organisation including any staff and volunteers. Individual trustees take collective responsibility for the Board’s decisions. The Chair provides leadership to the board and takes responsibility for ensuring the Board has agreed priorities, appropriate structures, processes and a productive culture. If the charity has staff, the board makes sure that there are proper arrangements for their appointment, supervision, support, appraisal, remuneration and, if necessary, dismissal. If the charity has volunteers, the board makes sure there are proper arrangements for their recruitment, support and supervision.

Integrity: Trustees have ultimate responsibility for the charity’s funds and assets, including its reputation. Trustees should maintain the respect of beneficiaries, other stakeholders and the public by behaving with integrity and acting in line with the values of the charity, even where difficult or unpopular decisions are required. Not doing this risks bringing the charity and its work into disrepute. The Board must not be unduly influenced by those who may have special interests and Trustees should place the interests of the charity before any personal interest.

Decision making, risk and control: The Board is ultimately responsible for the decisions and actions of the charity but it cannot and should not do everything. It may be required by statute or the charity’s governing document to make certain decisions but, beyond this, it needs to decide which other matters it will make decisions about and which it can and will delegate. Boards also need to ensure that their decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment and management systems are set up and monitored.

Board effectiveness: The Board has a key impact on whether a charity thrives. The tone the board sets through its leadership, behaviour, culture and overall performance is critical to the charity’s success. It is important to have a rigorous approach to trustee recruitment, performance and development, and to the board’s conduct. In an effective team, board members feel it is safe to suggest, question and challenge ideas and address, rather than avoid, difficult topics. An effective Board uses the appropriate balance of skills, experience, backgrounds and knowledge of its Trustees to make informed decisions. An effective Chair will enable the Board to work as a team by developing strong working relationships between members of the board and creates a culture where differences are aired and resolved.
Once decisions are made the Board unites behind them and accepts them as binding.

Diversity: Diversity, in the widest sense, is essential for boards to stay informed and responsive and to navigate the fast-paced and complex changes facing the voluntary sector. Boards whose trustees have different backgrounds and experiences are more likely to encourage debate and to make better decisions. Whilst the term ‘diversity’ includes the nine protected characteristics of the Equality Act 2010 Boards should consciously try to go beyond this and seek to recruit people with different backgrounds, life experiences, career paths and diversity of thought.

Openness and accountability: Public trust that a charity is delivering public benefit is fundamental to its reputation and success. Making accountability real, through genuine and open two-way communication that celebrates successes and demonstrates willingness to learn from mistakes, helps to build this trust and confidence and earn legitimacy. The Board must lead the organisation in being transparent and accountable and ensuring that the charity’s performance and interaction with its stakeholders are guided by the values, ethics and culture it has put in place. To do this the Board needs to identify key stakeholders and ensure there is a communications strategy for them, develop a culture of openness within the charity and, where appropriate, encourage member engagement with the charity.

The full code can be found at https://www.charitygovernancecode.org/en