‘It’s as dull as dishwater, and not worth the paper it’s written on’ was how one trustee of a large charity recently described ‘Good Governance – the Code for the Voluntary and Community Sector’ to us.

That view may be going a bit far, not least because when introduced in 2005 the Good Governance Code set a benchmark for what good governance should look like for charities, voluntary and community organisations. It was intended that it should apply to all voluntary and community organisations.

That universality now seems anachronistic. It positions the Code a little didactically, like a foundation/entry level introduction to governance, as though it is there to inform rather than raise the bar higher.

Any Code of Governance has the ability to ‘lift’ a sector over time. A code will create a frame for what really matters and will – or should – influence the development journey for many Boards, like a navigation tool for effectiveness.

In our view, the current Code no longer provides sufficient rigour to assure large or complex charities’ funders, commissioners, beneficiaries and other key stakeholders, or assist those charities in direct competition with private and public sector peers.

We suggest the following areas for consideration, reflecting learning from across sectors, as well as the need to respond to a changed world.

Greater emphasis on appropriate boardroom behaviours

Attaining procedural accountability is an important step but not the destination point of good governance. The need to place greater emphasis upon Board behaviours, team dynamics and for Boards to be actively involved in discussions around how to get the best out of them resonates across all sectors. Dipping in and out of an organisation through formal Board meetings alone is unlikely to create the conditions for high quality thought.

An outward looking board

The current Code has a strong focus on the fiduciary or stewardship aspects of governance, inviting the danger that Boards see their role reactively, diligently understanding scrutiny as effective challenge. An updated Code should emphasise a Board’s outward looking role; engaging in deeper enquiry and reflection, working collaboratively with executive staff, looking longer-term. Boards need to anticipate, project, hypothesise and bring an authentic degree of externality and independence to executive thinking.

Recognising the complexity of risk and accountability

The new and complex relationships of some charities as primary or sub-contractors are reshaping their risks, accountabilities and management of their trustees’ conflicts and potential conflicts. ‘Outcomes-focused’, ‘results-orientated’ agendas involve charities undertaking work at risk, sometimes pouring in resources with uncertain rewards. Given this we’d argue that Boards need to scrutinise new ventures for opportunities and risks more thoroughly, engage in stress-testing, and examine risk frameworks more frequently.

Tightening up expectations on board membership

Unlike Codes elsewhere, the Good Governance Code has ducked out of describing good practice norms for the size of a board and length of board membership. While absolutes can be misleading or distracting, experience leads us to believe that there are indicators or practices that are likely to provide the pre-conditions to any Board performing well. Setting some expectations can still embrace a ‘comply or explain’ approach.

Reflecting diversity at board level  

A specific aspiration in an updated Code could help maintain charities’ solid focus on diversity (35% of trustee places are held by women in the top 100 charities). As good practice, boards could also disclose their policy on boardroom diversity (in the widest sense), any measurable objectives that have been set for implementing the policy, and progress on achieving the objectives.

Transparency and accountability

Across different sectors, we’ve encountered confusion around how accountability is best delivered. We’d propose: public reporting of targets, performance and outcomes; clear structures of horizontal accountability (routes for beneficiaries and other stakeholders to hold the organisation to account); a predisposition to disclose information rather than withhold it; and some kind of public statement around how accountabilities are structured and delivered.

Social Responsibility

A new Code might expect an effective board to be transparent (like their corporate equivalents) in reporting on how wider corporate responsibilities are discharged. Despite a history of embracing environmental and sustainability policies, few charities talk about their ethics, their role in the marketplace and as employers.

Conclusion

The Governance Code for the voluntary and community sector set out the standard for charities. Now as we approach the Code’s 10th anniversary, it’s time to update and sharpen the Code to reflect the realities of the demanding environment in which larger and more complex charities are working. Such a step-change in governance would help to sustain public confidence in charities’ work.

A longer version of this article, co-written by Rosie and Radojka Miljevic, first appeared in the September 2014 edition of Charity Finance

September 30th, 2014

Posted In: Accountability, CSR, Governance, Transparency

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