Charities’ response to the updated charity governance code, published for consultation in November 2016, will reveal whether or not the sector is getting to grips with the fundamental changes it needs to make to its governance and regulation.
Along with fresh guidance on accountability, diversity and leadership, one encouraging proposal is for trustees to assess their charity’s effectiveness on a regular basis. This includes considering whether merging, partnering or folding would help them to improve their outcomes.
Although the code is well-intentioned, I fear very little will change as the guidance is just that – guidance. Until exploring mergers actually becomes an obligation for trustees as part of their fiduciary duties, then it is hard to see the proposals having much effect. The same can be said of many of the other common-sense suggestions in this code.
Over the last three years analysis in our Good Merger Index has shown that few charities have come together despite great headwinds buffering the sector. Out of 163,000 registered organisations only about 60 mergers were completed last year, while another 1,000 new charities were added to the list. Put that a different way – for every charity that merges and reduces duplication, more than 10 new charities are created. There needs to be a change in culture, and surely it’s time to start sanctioning those that fail to put their beneficiaries first?
The reality is that time and again we see boards stick their heads in the sand and fail to take heed of well-meaning advice. Charity boards remain less diverse than corporate ones and many have trustees who serve beyond the advisory nine-year term. Board meetings too often prioritise the survival of their charity and fail to recognise that beneficiaries want the best services, regardless of where from.
Taking the long view, the growth of organised charities is a great success story of the past two decades, but regulation and governing institutions have not kept pace with this expansion. Much of the public concern with charities stems from this tension: either charities are seen as not professional enough to manage complex and high-risk services, or not voluntary enough to put vulnerable people before their organisational interests.
My concern about the new governance code is that it does not go far enough. The Charity Commission and infrastructure bodies like NCVO and Acevo, who fear criticism from their members, need to understand that the best support they can give is to advocate a tougher regime with more obligations and scrutiny for trustees.
Stronger corporate governance isn’t a straitjacket but essential to the charity sector in the modern age. Many of the most effective charities in the country are calling for this. They are fed up being tarred by the brush of mediocrity and caught up in a media scramble to defend sector-wide failings.
The voluntary governance code has the right intent, but the proof of the pudding will be whether the sector can implement it without regulations to back it up. History, culture and attitudes suggest it won’t.
Richard Litchfield is chief executive of Eastside Primetimers. This blog originally appeared in the Guardian Voluntary Sector Network on February 6th 2017.