‘Kids Company verdict carries important lessons for all those involved in charity governance,’ says ICSA: The Chartered Governance Institute

London, 12 February 2021 – ICSA: The Chartered Governance Institute has today welcomed the benevolent approach to charity trustees that today’s Kids Company verdict has upheld, whilst recognising that the 221-page verdict contains important lessons for all those involved in the governance of charities. Overall, the judgement underscores the importance of good governance: of effective oversight, training, assurance and risk management, all of which is best supported by a governance professional.

Peter Swabey, Policy and Research Director at the Institute says:

“There are almost one million volunteer trustees in England and Wales and many will have been relieved the long-standing tolerance of the Court for charity trustees who have not committed fraud or deliberately misled or mismanaged the charity’s resources is re-affirmed. Charities, like other types of organisations, fail from time to time despite the best efforts of trustees and sending a message of support will act as a ‘safety net’ for volunteer trustees trying to do their best. Removing that ‘safety net’ could have negatively impacted the number of people willing to take on a trustee role.

“Judge Falk is quite right to point out the importance of the charity sector being able to attract a strong calibre of trustees, ‘The charity sector depends on there being capable individuals with a range of different skills who are prepared to take on trusteeship roles. It is vital that the actions of public bodies do not have the effect of dissuading able and experienced individuals from becoming or remaining charity trustees.’

“We recommend that all new trustees should undergo a thorough and tailored induction programme put together by the chair of trustees and the charity’s governance professional – the one person who knows the duties of charity trustees inside out. This induction should be agreed with the trustee and supported by ongoing development opportunities (including refreshers), something which is important for all trustees.

“These activities should be reported publicly via the annual report or website so that trustees hold the importance of such activities front and centre of their minds. Public engagement should also help raise expectations and may improve challenge and accountability. In addition, charities should think closely and regularly about board composition. Using trustee terms of office as an opportunity to refresh board composition is the ideal way to ensure that a charity board has the skills and knowledge that it needs to succeed.

“The Court finds against Camila Batmanghelidjh being a de facto director and makes a number of important observations about the role of the charity CEO. We are pleased to read the judge’s comments on the importance of the voluntary nature of trusteeship. The decision to throw out disqualification measures is probably a happier outcome for the sector as a whole as it doesn't challenge the underlying principles of trusteeship. But, charities do need to be alert to charges of de facto directors for CEOs.

“If a charity believes an executive trustee would enable the charity to better deliver its charitable objects then the pros and cons should be clearly laid out by the governance professional, along with workable arrangements to ensure that the organisation adopts the approach which is best suited to achieving its objects. This should be regularly reviewed and changed if it isn’t delivering.

“Having clear, robust and effective governance arrangements in place is a well-practiced way of limiting the risks of the CEO (or another) being seen as a de facto director, such as having formal, approved minutes of meetings, clear processes of decision making and delegation to the CEO and others and having regular board meetings without the CEO (or other person) present. Importantly, it also means having skilled, independently minded trustees (who are fully informed of their legal duties and liabilities) and have had adequate induction and training. Having forensically examined the issues, the Judge concluded governance was functioning although the minutes of meetings could have been kept in more depth and circulated in a timely manner. These were taken by the CEO’s Personal Assistant who would have benefitted from the training a governance professional receives on delivering good board minutes.

“We would encourage large charities to undertake an external board review and publicly report key findings and actions. We would also encourage charities to follow the Charity Governance Code as this would be the quickest way of raising governance standards. Additionally, charities of a certain size and complexity should appoint a suitably qualified and experienced governance professional to lead on governance.”

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  1. Notes to Editors:The Chartered Governance Institute is the qualifying and membership body for governance with over 125 years’ experience of educating and supporting governance professionals. With a Royal Charter purpose of leading ‘effective and efficient governance and administration of commerce, industry and public affairs’, we provide professional development, guidance and thought leadership, and work with regulators and policy makers to champion high standards.

    The Institute has divisions in Australia, Canada, Hong Kong/China, Malaysia, New Zealand, Singapore, Southern Africa, the United Kingdom and Zimbabwe. The division headquartered in London (known as ICSA: The Chartered Governance Institute) represents and supports members in the UK, Republic of Ireland, Crown Dependencies and associated territories, which include the Caribbean, sub-Saharan Africa, the Middle East, Mauritius and Sri Lanka.
    Website: www.icsa.org.uk 

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