Public benefit = maximising value for beneficaries

By John Copps 5 November 2009

NPC has long observed that charities don’t put enough emphasis on thinking and talking about what they achieve.

Earlier this week I saw a presentation given by Dai Powell, CEO of the HCT Group, a £15m social enterprise that provides public transport and training services across England. Speaking from the position as half way between business and charity, he made a startling point about what the law requires of each type of organisation.

Managers of companies have a legal duty to maximise benefits for their shareholders. This means that it is written into law that businesses must strive to produce the best results they can. In contrast, charity legislation requires little more than that trustees and managers ensure money is not wasted. There is barely any emphasis on creating value for beneficiaries, and nothing that relates to the results of organisations’ work.

Over the past few years, the debate on public benefit has given charities a chance to define ourselves more by the value we create. We have not taken it. We have got hung up on what we mean by doing good (for example, the question of whether independent schools and hospitals should be charities), and missed the more fundamental question: whether we succeed in doing good.

Akin to what the law demands of companies, if properly considered, I think that public benefit implies a duty of charities to maximise value for their beneficiaries. After all that is why we exist.

The debate on public benefit needs to be moved beyond the narrow concerns of who should and shouldn’t be a charity. At present, the charitable sector lags behind in the emphasis we give to creating value – which is something we should not be proud of.

(Early next year NPC plans to run an event debating the way forward for public benefit in partnership with Farrer & Co)