Today [7 November] saw the launch of consultation on a refreshed and renamed Charity Governance Code.
The Code is overseen by a Steering Group of ACEVO, Association of Chairs, ICSA: The Governance Institute, NCVO, Small Charities Coalition and Wales Council for Voluntary Action, and I am the Group’s independent chair.
As we all know, charity governance has been in the spotlight since the Code was last updated in 2010. I am not amongst those that think that the model of charity governance is broken beyond repair and our Group’s starting point for reviewing the Code was that trustees work voluntarily and conscientiously. Despite the many challenges they ensure that their organisations are effective and well-run. However, the case for good governance in charities led by committed and engaged trustees with an understanding of their role, appropriate skills and an ability to lead has never been clearer.
In our consultation, we want to encourage discussion and debate about what standard of governance charities should aim for in the coming decade; what it will take to make a measurable shift, and how the Code can be used to raise that bar.
The draft Code is applicable to all charities and it highlights aspects that are only relevant to larger charities.
There are seven principles, which build on a foundation that assumes that all trustees are committed to their charity’s cause; understand their roles and legal responsibilities and are committed to good governance.
Some of the new Code is familiar. Elsewhere there are significant changes, not least the expectation that boards will use the Code as a tool for continuous improvement, and that larger charities will meet the spirit of the Code by either applying its recommended practice or explaining in their annual reports any aspects which they do differently.
Organisational Purpose and direction
The Code now places more emphasis on the board’s focus on strategy and assurance, and its role in determining and achieving the organisation’s purpose. Boards are recommended to regularly review the external environment in which the charity works, and assess whether the charity is still relevant. The Code proposes that trustees consider partnership working, merger or dissolution if others are seen to be fulfilling similar charitable purposes more effectively.
This principle anticipates that every charity is headed by an effective board that provides strategic leadership in line with the charity’s purposes and values. For the first time, the Code talks about the role of the chair.
Culture and behaviours are an important aspect of leadership and the Code proposes that boards recognise, respect and welcome diverse, different and, at times, challenging views.
This principle proposes that the board makes sure that the charity operates responsibility and ethically, in line with its own values and ethics and those of the wider voluntary sector. We are particularly interested in hearing whether, and how, this emphasis on the wider sector might work in practice.
Decision making, risk and control
The draft Code recommends that the board retains overall responsibility for risk management, and discusses and decides the level of risk that it is prepared to tolerate. It also proposes that boards promote a culture of prudence with resources but also understand that being overcautious and risk averse is itself a risk.
A board’s diversity, in the widest sense, supports its leadership and decision-making. The Code emphasises the importance of an environment in which the board welcomes people with different backgrounds and experience.
If charities are aspiring to more, than looking at board dynamics and behaviours is an obvious area of focus. The updated Code is explicitly proposing that:
- A forward-looking board embraces regular reviews of its performance.
- A board of at least five but no more than 12 people is typically considered good practice
- If a trustee is to serve for more than nine years this is subject to a particularly rigorous review, and considers the need to refresh the board.
Open and accountable
The Code recommends that charities are open in their work unless there is good reason not to. It proposes that the board keeps a public register of interests for trustees and senior staff, and we especially welcome feedback on this suggestion.
You can read and download see the proposed Code and consultation questions at www.governancecode.org/consultation. Alternatively, do please email your comments to firstname.lastname@example.org. The closing date for comments is 4 February 2017. We want a Code that meets the challenges of the next decade, so do let us know what works for you and what needs changing.