Takeaways from our Charity Governance Summit 2021

Charities have an important role to play in the collective process of recovery and rebuilding from the COVID-19 pandemic. That was the message of Helen Stephenson, chief executive of the Charity Commission for England and Wales, our keynote speaker at this year’s Charity Governance Summit, which took place in September 2021. She stressed the crucial contribution charities make locally, nationally and internationally and highlighted the huge potential charities have to contribute to the effort to build back better.

I think that charities can do this in numerous ways, but several areas where improvement is required jumped out at me at the conference. Firstly, there is the perennial issue of lack of diversity. As Helen mentioned, charities are a key part of the social fabric, and those working within the sector perform an essential service. However, only 8% of trustees in England and Wales are from Black and Asian backgrounds, according to Action for Trustee Racial Diversity (ATRD), and 34% of UK major charities have all-white senior leadership teams. Charities must question whether they have sufficient diversity at board level to truly understand the communities in which their charities operate. Ideally, charity boards should reflect the diversity of the community they serve.

One solution would be for charities to follow the recommendations in the latest iteration of the Charity Governance Code, which the Institute helped update in 2020. The Code now includes an enhanced diversity principle, which seeks to help charities maximise their public benefit by improving equality, diversity and inclusion (EDI). EDI can improve legitimacy in the eyes of the communities charities seek to serve, and the Code should be the starting point for any charity looking to improve its diversity. In addition, ATRD’s ‘From Here to Diversity’ guide, the first-ever guidance specifically designed to support boards with recruiting Black and Asian charity trustees, should help trustee boards to implement the Code’s recommendations around EDI.

Some charity commentators equate the lack of diversity in the sector with the fact that trustees are voluntary. Sir Stephen Bubb, who spoke at our session looking at the governance issues surrounding the Kids Company case, certainly believes that due consideration should be given to the thorny issue of payment of trustees.

While recognising that the majority of charities do not employ staff, Sir Stephen believes that larger charities should be thinking about remuneration of trustees as this establishes a contractual relationship strengthening the basis for relying on trustees to attend meetings and read papers. Many trustees do act like this already, of course, and it is important to remember that, while the underlying principle of charities being volunteer-led still holds true for most charities, it is already possible to pay trustees, with the agreement of the Charity Commission.

Ultimately, if boards are not more representative of the people they aim to serve, then success is unlikely to follow. Similarly, while it is perfectly understandable that benefactors want a high proportion of funds spent on the end cause, modern charities have a whole host of other considerations that they now need to take into account.  

The Institute launched ‘The virtuous circle of good charity governance: the role of the governance professional’ at the Summit, which coincidentally linked many of the topics covered over the course of the two days: the fact that good governance is inherent to successful charities and helps to deliver purpose and impact; the fact that governance is about people and behaviours and the reputational damage that may arise from not engaging with stakeholders meaningfully; diversity in decision making as a key aspect to strengthening effective governance; and the rise of environmental, social and governance (ESG) factors, particularly a charity’s impact on its communities and the environment.

Public concern about climate change, in particular, is a growing issue and one that charities definitely need to have on their radar. It was, therefore, reassuring to find that responses to a poll that we ran during the Summit showed that 43% of respondents’ boards think that climate change is core to the sector’s ethos and that charities should be part of the solution.

As Maisy Hulbert, Policy Officer at ACEVO, rightly pointed out, we are not talking about hypothetical risk. Climate change is happening now. Indeed, such is the focus on this topic at the moment that the Charity Commission is interested in hearing people’s views about what the role of the Charity Commission should be in terms of helping charities through the topic of climate change.

If I have one key takeaway from the conference, then it is that charities perform crucial work, but they need to think more closely about ESG in terms of their values, how they attract supporters and how they maximise impact. People want charities to show that they live their values and make a positive difference. Good governance underpins all of these expectations and focusing on ESG considerations can only help charities to serve beneficiaries better.

Sara Drake, Chief Executive, The Chartered Governance Institute UK & Ireland