Thursday, 14 January 2010

Progressive Governance

Dorothy Dalton, the former and first chief executive of ACEVO runs the widely respected governance magazine. The publication and website is a great resource to trustees and organisations of all sizes around the country.

In her most recent editorial she has tackled the issue of remunerating trustees and establishing unitary boards. This is, according to Dalton, “wholly inappropriate”. I’m afraid we disagree.

Dalton is writing in response to Kevin Carey’s recent speech at our annual conference, and the subsequent establishment of a progressive governance network to support organisations who wish to reform their governance structures.

In making her case she cites the financial stresses under which organisations currently find themselves, and that some unitary boards have also resulted in poor decision making as witnessed by us all in causing the financial crisis. She discredits unitary boards in the NHS by citing one example of a board who oversaw a dirty hospital.

All of these are inexcusable failures and in the case of our banks the repercussions have been monumental. But the fact that the implications of those governance failures have been so widespread says more about the power of banks than it does about the structure of governance which failed, and does not in one sweep discredit a governance framework which has prevailed in the private sector for more than a century. Lots and lots of third sector organisations are badly run too – but their failures are less widely felt.

Every week I speak to ACEVO members who have thoroughly dysfunctional boards, with in-fighting common and chairs not willing to take control. One board hadn’t had a formal meeting for nine years, yet the organisation continued to operate. In these cases it just so happened that publicity hasn't found them but I am in no doubt that it is just a matter of time before an incident like this in our sector is front page news.

And to tackle the issue of money, clearly paying trustees costs. But the decisions boards take make or break organisations. Avoiding bad investment strategy, or a misjudged budget, would easily outweigh the costs of modestly remunerating your trustees thousands of times over.

No governance system is perfect, all have flaws and in human nature things will always go wrong. Dalton criticises ACEVO for opening up the argument about alternatives to the status quo. Let’s first be clear about ACEVO’s line on this because we are often misrepresented on this point. We do not believe that every third sector organisation should pay its trustees or have a unitary board. For very many this won’t be appropriate.

However we believe that third sector organisations should have the option to explore alternative models if they feel that this is the right decision for them in order to meet the needs of their beneficiaries. (Incidentally Dalton alludes in her article to whether or not such payment is in the interest of the beneficiaries or in the interest of individual board members. The latter would certainly be a serious alligation, and I am keen to know whether there is hard evidence of where charities have tried to make such changes for any reason other than the good of the organisation’s beneficiaries.)

It is a fundamental tenet of good governance to review the way in which the board operates and discuss whether things could be done better. It would be negligent for a board not to consider the question of whether its structures are fit for purpose. The fact that it is incredibly difficult to change a charity’s governance structure to allow paid trustees or unitary boards means that organisations do not in practice have the opportunity to reasonably explore these other options. I know of a number of ACEVO members whose boards would like to make these changes but are simply not prepared to fork out for the legal fees and time in negotiating with the Commission to make their case. In some cases members have reported that the Commission has refused to allow such arrangements without clear feedback on the reasons.

Dalton is quite right that no one should force a governance structure upon any other organisation. However the reality is that the status quo is being forced upon many ACEVO members and their boards who firmly believe that they would be better run if they adopted a different structure. By Dalton’s own logic they should be allowed to do so.


  1. Hey Seb,

    Good argument, and well put as always. Though I think what Dalton may have been trying to articulate is similar to what some people said when you asked the question about remunerating trustees at the 2008 ACEVO annual conference.

    The response some members gave was that it is one of our sector's most defining features that people give up their time and expertise free of charge to good causes. Doubtless this might leave some people and skills outside the charity board room, but if a professional is not the kind of person to give up their time for a good cause, what kind of contributions would they be making to the board anyway?

    I think your ultimate point is right though. It is needless thinking that one governance model fits all; after all every governance model works on paper. It should be for charity trustees and their stakeholders to decide what model will be of most use to their beneficiaries.

    Here's to de-regulation!

    Hope you're well.

    Richard J. Doughty

  2. Fab, you are so "on message" it hurts. Beautifully argued my good man. Hopefully people will be so dazzled they will miss the obvious fact that it isn't lack of remuneration that prevents attracting trustees or achieving good governance and that plenty of organisations are very well run under the current arrangements. I also hope that they don't point out that the two extreme examples of shocking governance you allude to are the exception rather than the rule and can be addressed in ways other than throwing money at the problem. Finally I also hope people don't make any connection between your bosses' views and lucrative paid board positions and the organisational view you espouse.

    Seek ways to review governance by all means but don't make the mistake I have and focus on the payment side of the debate.

  3. Robin you sound uncharacteristically serious. Is it time for a drink? Champagne naturally.

    You are quite right that we shouldn't focus on the payment side of the debate - and yes there are plenty of ways to improve governance in the sector other than seeking payment. All I am arguing is that people should be allowed to consider and discuss it as an option. Let's be pragmatic not dogmatic about governance reform.

  4. My points are usually serious but couched 'neath a veneer of ridiculousness...

    This is a healthy debate that needs to be had, no question.