This week saw the release of Lord Hodgson’s eagerly awaited review of the Charities Act. Although the report was generally welcomed, some of his recommendations have ruffled feathers in the charity sector. Chief amongst these was the suggestion that large charities be allowed to pay their trustees. A coalition of umbrella bodies immediately expressed concerns in a joint letter to Nick Hurd that ‘remuneration could be very damaging for the sector and [charity] beneficiaries’.
Currently charities cannot pay trustees unless they receive specific permission from the Charity Commission. However all charities can reimburse trustees for expenses, and pay for professional services provided outside the trustee role. The review recommends that all charities with an income over £1m be allowed to pay trustees if they choose, while smaller charities continue to apply for permission as they do currently. If implemented, these reforms would affect about 4,500 charities; less than 3% of the total number but representing over 75% of the sector’s overall income.
Payment of trustees is a contentious issue which sparked a lively debate at our recent seminar on the subject. Two differing views emerged on the role of charities. On the one hand, Kevin Carey, chair of the RNIB, made the case that charities are vehicles for the delivery of service whose chief moral responsibility is to their beneficiaries. If paying trustees leads to a more effective organisation delivering greater benefit, then this should be the primary concern. Alex Massey from ACEVO agreed that charities should be free to choose governance arrangements suited to their operations, and use charitable resources as they see fit to achieve their charitable objects.
Opposing this view, Debra Allcock Tyler from DSC argued passionately that charities are founded on expectations of altruism. Unpaid trusteeship maintains public trust, ensures that trustees are motivated by and committed to the cause, and demonstrates to the sector’s volunteers that payment is not an indication of value. Tony Manwaring of Tomorrow’s Company echoed some of these views, emphasising that voluntarism underpins the sector’s values and individuality. He spoke about the brand of the sector as a whole, and concerns that it might be damaged if voluntarism were diluted.
So what was the reasoning of the review? Lord Hodgson recognised that few charities felt that inability to pay trustees was a barrier to recruitment, and a majority of the public felt trustees should not be paid. Citing evidence from universities and housing associations, he found ‘no real indication from sectors that do have the general power to pay trustees that they have found this helpful in recruiting and retaining quality trustees’. He also stressed that voluntarism was ‘a fundamental tenet’ of the review, and noted the risk of abuse of the power to pay trustees.
Nonetheless the review states that paid trusteeship should be an option for ‘truly huge organisations handling substantial amounts of public and private money’. His recommendation seems to be based on the need for large complex organisations to have highly skilled boards, and the reassurance that the accounts of these higher profile organisations will be subject to scrutiny which smaller organisations might escape.
Undoubtedly the trustees of large charities need to grapple with issues such as social investment and payment by results. Increasingly complicated business models bring substantial risks, and skilled boards are required to manage them. But do skilled boards need to be paid boards? Many highly skilled people can and do give their time on a voluntary basis. In addition, large charities operating at this scale usually have well-resourced professional staff teams with expertise to support the board in its strategic oversight.
So what do you think? Are you convinced by the arguments in favour of allowing charities to pay their trustees? Is it more appropriate for larger charities? Or do you worry that this will create a two tier system?
If you want to know more, about trusteeship, NPC has a wide range of publications on our trusteeship page. Look out for our upcoming briefing from our recent seminar on the payment of trustees.