“When you think about the current environment in which we live, trust and integrity feel more important than ever.”
Rosie Chapman, outgoing Chair of the Charity Governance Code Steering Group, talks to Governance and Compliance about how the Code has evolved during her term, the Group’s successes and future challenges for charity governance.
Interview by Holly Benson, Editor of Governance and Compliance
You are about to complete your six-year term as Chair of the Charity Governance Code Steering Group. Can you tell us about how you became the Chair and whether the reality of the role met your expectations?
Having originally worked at the charity regulator, the Charity Commission, I was aware of the Charity Governance Code (the Code) and encouraged its original inception in 2005. When my predecessor, Lindsay Driscoll’s, term as Chair was coming to an end, I thought I should put my money where my mouth was. If there were things about governance that were important to develop in charities, I felt should do my bit to help promote the Code and take it forward. I applied for the role and I got it.
The Chair is a voluntary role looking after a Steering Group that oversees the Code. The Steering Group is made up of six organisations who all have an interest in good governance in charities. In that sense, it’s very different to many of the governance codes you find in other sectors where it’s just one organisation that oversees good practice.
I thought there would be an organisation which would take the Code forward and I would be a figurehead chair, but it was much more hands-on than I had anticipated. Some of that might be because I’m a bit of a control freak and some of it may be a result of my regulatory background. Words can be very important in expressing principles in a way that allows people to be clear about their meaning and intention.
When we came to drafting and improving the Code, I was very interested in being clear and explicit about the wording so everyone would know what was intended. What have been your greatest achievements during your two, three year terms?
I would like to say up front that the Steering Group members have been a pleasure to work with. I’m really pleased with the way we all operated together as a very consensual group. The Steering Group is comprised of the Charity Leaders Network (ACEVO), the Association of Chairs, the Chartered Governance Institute UK and Ireland (CGIUKI), the National Council for Voluntary Organisations (NCVO), the Small Charities Coalition, the Wales Council for Voluntary Action (WCVA) and an observer from the Charity Commission. Despite all having potentially very different interests, the group worked together productively.
Increasing buy-in by charities is something I’ve helped to achieve during my terms. The Code is now considered as the good governance code for charities to follow; it’s seen as the sector norm. I’m also really pleased that the Code set out clear expectations and practical advice on what good governance looks like.
Little things like saying that good practice is to have a board comprised of more than five but fewer than 12 members or that a trustee wouldn’t normally be expected to be a board member for more than nine years – previously these kinds of tips weren’t included in the Code.
People often think the Code is a regulatory requirement owned by the Charity Commission but it’s not, it’s by the sector and for the sector. With that being said, I like the fact that in regulatory cases the Charity Commission is increasingly asking whether a charity has been following the Code and if it hasn’t, asking why not. I think that’s right, that the Charity Commission aren’t saying that you must follow the Code – especially if there is a more relevant code for your charity – but they do look to it as a sign of good practice.
I was particularly pleased to see research from RSM (a provider of audit, tax and consulting services) in 2021 which found that charities who said that they had adopted the Code in their trustees’ annual report tended to have around 10% better governance than those that hadn’t. I saw that as evidence that the Code is having a beneficial effect.
Despite all of this, there’s still more work to be done in terms of encouraging take up. I think the last figures I saw in the RSM research showed that 55% of charities included in the research were reporting on the Code in their trustees’ annual report which leaves a lot that aren’t.
Another achievement is establishing a habit of having a look under the bonnet every three years to make sure that the Code remains relevant. We did two consultations to improve the Code while I was Chair, one big review in 2018 and a smaller one in 2020.
Despite having made updates as recently as 2020, I can see that when the next consultation happens it will probably need to look at new topics such as the environmental, social and governance (ESG) agenda.
There’s a lot to think about going forward. The thing to remember with codes is that you must take things out as well as adding them in to keep them manageable.
You mentioned that currently around 55% of charities in the RSM research acknowledge the Code in their trustees’ annual report. For the remainder, what could be the barriers to application of the Code?
In my experience of working with and in charities, there can be some underinvestment in governance.
Lots of charities know that it’s important so they’ll invest in the right sort of governance support, such as CGI members who perform a valuable role, but I have been quite surprised that some large charities have been a bit reticent to invest. There might be a practical issue in that I sense there may be a shortage of governance professionals at the moment. For smaller charities where resources might be limited, they inevitably may place their focus more on operational activities. Finally, there will be charities where another code is more relevant.
The Code refresh strengthened the integrity principle to include consideration of the health and welfare of all those that come into contact with a charity. It also re-shaped the diversity principle to incorporate equality, diversity and inclusion (EDI). What impact do you think this will have on the sector?
An important principle when we did both consultations was to have ‘big ears’, to listen and to make sure that we carried out as wide a consultation as we possibly could with the resources available.
In relation to EDI, we wanted to take on board what it meant and put in place practical steps for implementation. With that in mind we commissioned some expert help, held some focus group meetings and listened to experts in the field. The result was practical advice on what charities need to do in terms of EDI, how to go about setting achievable targets, how to measure performance, how to report on that and then to start the circle all over again. It got positive buy-in from the sector and was something we did well. If anyone hasn’t seen that part of the Code I would commend them to go and look because it’s very clear and straightforward; it’s expressed in language that you can deliver on. It also recognises that different charities are at different stages in their journeys.
Integrity as a principle feels important but it’s challenging to tackle in a meaningful way. The integrity principle was updated to communicate that everyone who comes into contact with a charity should be treated with dignity and respect. Some of that relates to approaches to safeguarding and some of it is in a code of conduct for behaviour. When you think about the current environment in which we live, trust and integrity feel more important than ever. Hopefully the updated Code sets this out in a straightforward way. We were fortunate to have a critical friend in this area in addition to the consultation. We didn’t adopt everything they suggested this time around but next time it might be good to think some more about how people hold and use power in a charity and making sure they don’t abuse it.
Since its inception and release in 2005, how do you think the Code has impacted on governance practice in the charity sector?
Governance in the charity sector has come on leaps and bounds since the Code was first released in 2005 and in terms of a journey it has been pretty amazing. In this interview I have mentioned lots of things that could improve but the sector shouldn’t beat itself up – it’s more a case of ‘yes, and …’ in terms of improvements. The Code has reflected the move by charities to improve the way they tell their story and describe the outcomes they achieve and the impact they make. The Code has helped charities to report in a useful way how charitable money is being used. In recent years I think you could say that corporates have become a lot more socially responsible, charities have become more ‘commercial’ and both types of entity are getting closer together in many ways. Increasingly, if you think about how some corporates now present themselves, there’s a real onus on their wider social responsibilities.
Do you think there are lessons that corporate organisations could learn from the charity sector? Or are there practices in other sectors that you think could be usefully implemented by charities?
During COVID-19, charities were great at identifying their purpose and having a powerful impact at a time of crisis. Of course, I’m not saying corporates didn’t do that, but I think it’s something charities did really well.
I wondered if the corporate sector may learn from charities in terms of diversity on their boards. Charities aren’t perfect but I sense from data I’ve seen that some corporates have a long way to go in terms of boardroom representation by ethnicity and race.
In terms of what charities could learn from the corporate world, I wonder whether there’s more that charities could take from the governance code for private companies which sets out good practice around engaging with staff in a meaningful way.
Some – but not all – charities are good at this. Corporates are also good at investing in digital development although this can be harder for charities where ‘up-front’ money may not always be as readily available.
Looking to other sectors, I noticed that Sport England and UK Sport’s recently updated governance code has beefed up EDI requirements and addresses ESG – both are ongoing areas of consideration for the next iteration of the Charity Governance Code.
The sport governance code has also emphasised the promotion of good governance at all levels; there may be something there for the charity sector. I’m not sure that we’re clear enough about the strategic–operational divide and what that means throughout an organisation. The sport governance code also touches on strong people plans which goes back to my point on thinking about staff engagement.
What advice might you offer to the incoming Chair of the Steering Group?
I recently read a blog from McKinsey & Company where they are calling the future the ‘next normal’. For the Code and my successor, staying aligned with what the next normal will look like will be important; I’m thinking about areas such as digital, ESG and looking after people. Diversity and inclusion issues are not going to go away so that’s a continuing area of work.
There are also considerations about what continued online board meetings and not being together face to face means for how boards will operate. That said, one of the Code’s limitations is that it can’t solve everything – online meeting etiquette is probably more suited to guidance rather than a code. I think the next iteration of the Code will be influenced by what the next normal is shaping up to be.
I would also say, listen and have ‘big ears’ and remember the importance of consensual working. And it’s a great role – enjoy it! As you step down from what has been a hands-on role at the Charity Governance Code Steering Group, what do you have planned next?
I’m continuing in my role as protector of Big Local Trust and looking forward to seeing what that organisation is going to be doing over the year, especially as its focus is on putting power, resources and decision-making into the hands of local communities, something which resonates with a lot of the discussion going on at the moment with the ‘levelling up’ agenda.
CGIUKI is working with the Confederation of Schools Trusts to develop a specific version of the Code for the academy sector.