In this piece Jim Dickinson from UEA and Ben Ward from Manchester look at the new Charity Governance Code and consider how it might be used in our sector
The voluntary sector steering group on Charity Governance has released a new Charity Governance Code. The updated version of the code sets out higher standards and urges larger charities to carry out external reviews every three years.
Other key recommendations include increasing diversity on boards, a limit of nine years for trustee terms unless a good reason is given, more oversight of subsidiaries and a stronger emphasis on the role of the chair.
The code is overseen by a steering group of charity umbrella bodies comprised of the Association of Chairs; Acevo; ICSA: The Governance Institute; NCVO; the Small Charities Coalition; and the Wales Council for Voluntary Action, and with an independent chair, Rosie Chapman (a former Director of Policy & Effectiveness at the Charity Commission)
Consultation on changes to the code, which was previously called the “Code of Good Governance”, began last year and received over 200 responses (including a number of Students’ Unions). Work on the code was funded by the Barrow Cabury Trust and the Clothworkers Foundation.
Interestingly, the Charity Commission (who have an observer on the Code’s steering group) has withdrawn its old “Hallmarks of an Effective Charity” guidance in favour of directing people to the new code.
The Code is divided into principles – it sets out a relevant principle, then explains how this principle should be complied with in practice. The relevant principles are: organisational purpose; leadership; integrity; decision-making, risk and control; board effectiveness; diversity; and openness and accountability.
Apply or explain in your accounts
The Code adopts an “apply or explain” approach – in other words, charities should either apply the recommended practice set out in the Code, or explain why they have not followed a particular practice and explain what they have done instead. Charities are encouraged to publish a brief statement in their annual report explaining their use of the Code.
The new Code introduces a range of more stringent measures for trustees. Some of the key changes from the previous position include:
- An explicit statement that generally, trustees should not serve for terms of longer than 9 years (unless exceptional circumstances apply);
- A wider focus on ensuring that the board has the right mix of skills, knowledge and experience to deliver the charity’s purposes effectively, and an explicit statement that a board should typically consist of 5 – 12 individuals;
- A requirement that the board should review its own performance and that of individual trustees each year, with an external evaluation by a third party every 3 years;
- A greater focus on diversity, with the board taking part periodically in diversity training, and making a positive effort to remove obstacles to people being trustees. The board should see diversity as an integral part of its board reviews;
- A greater focus on openness and transparency;
- A greater role for the Chair to provide leadership to the board and take responsibility for ensuring that the board has appropriate priorities and structures in place; and
- An explicit requirement that trustees should consider the benefits and risks of partnership working, merger or dissolution if other organisations are fulfilling similar charitable purposes more effectively.
Students’ Unions in limbo
Its’ publication, and the expectation that charities will use the code to publish “apply or explain” statements in their accounts, does leave SUs in some limbo when it comes to the assessment of SU Governance effectiveness.
Back in 2010 when we were working for NUS, we undertook a two year project to support the improvement of the governance of students’ unions, with the view to building stronger relationships between students’ unions (SUs) and higher education institutions (HEIs). This project was funded by the HEFCE; Leadership, Governance and Management Fund. One of its outputs was an adaption of the voluntary sector code on Governance with some language changes and an additional section on democracy. As such we were able to use and adopt a code that was well regarded within the sector but fundamentally based on a familiar code to the Charity Commission. A shorter version is also to be found within the QSU standard (although QSU encourages SUs to use the main code)
As well as the development of the new charity code, SUs have faced a number of charity regulation issues in recent years where bespoking (or at least explaining rather than applying) might be necessary:
- Continued controversy over regulation of external speakers
- Some difficulties around permissible political activity
- Reputation issues surrounding the political nature of sabbatical officers
- Tensions between political structures and corporate governance structures
- The levels of control exerted by the parent HEI
More broadly, the major difference between the old Charity Code/old NUS Code and the new Charity Code is a focus on the behaviour/performance of Trustees, rather than its structures or policies. The “Outcomes” section of each theme describes behaviours or understanding that should be being practiced/displayed by members. For example- 1.4.1 requires that “all trustees can explain the charity’s public benefit”. In the past we might previously have seen something about a Public Benefit statement being approved. This is a helpful change and focusses the mind when it comes to Board training and development.
However the major problems with the Charity Code are similar to those of its previous iteration- it is insufficiently mindful of what it means to be a democratic membership charity. Jim has written on these themes before- not least to point out the dominance of the “altruism” model of charity in the UK rather than “self help” traditions across Europe, and how that affects assumptions about Boards and Governance within the main umbrella Charity bodies like NCVO.
The results are (for example) that the code assumes that all “Governance” is done through a Charity’s Board- whereas for us, frequently key Governance tasks related to the resolution of competing interests are carried out in separate democratic fora. For example- the section on diversity focusses on the Board’s diversity, but for us Boards should be keen to drive diversity across our democratic and participation structures. It also tends to only view “leadership” in a Charity as being the Board (in its Governance role) and Managers (in their execution role). The role of political leadership- to the extent to which it appears- is the square peg wedged into the traditional charity round hole.
What can be done?
Below you will find links to the old voluntary sector code, the current NUS Code, and the new Code. You will also find a link to a short analysis comparing the new code to the old NUS Code for reference.
Given that the Commission has now withdrawn its hallmarks and is directing people to the new Code- and given that the Code expects Charities to “apply or explain” in their annual reports- the smart thing for the student movement to do now would be to adapt the new code, encourage all of us to use it and then engage with both the Voluntary Sector umbrella bodies, the Charity Commission, and the HE Sector bodies involved with the 2010 NUS Code to seek broad approval.
This would allow us all to positively adopt a code suitable for our operating environment rather than have to “explain” where we differ. To this end we have had a first stab at adapting the code for SU purposes and we would welcome feedback on the draft.
In addition given the new expectation we take the view that we should develop a peer review system for HE SU Trustee Boards. The idea is that a trained CEO and Chair/President of an SU would visit your union, examine your self assessment against the code and conduct interviews every three years.
We think it would be helpful to discuss over the summer before the term really gets going- and so we have organised an informal gathering on August 30th to be held at Manchester SU to discuss the adapted code, the self assessment idea and engagement with HE/voluntary sector bodies. If you are interested in attending please let Ben or Jim know by August 14th.