Governance crisis? What governance crisis?

This blog first appeared on on 15th August 2016.

Our Chief Executive, Paul Streets OBE, considers the issue of governance from the perspective of small and medium-sized charities. 

Charities face different governance challenges depending on their size, writes the chief executive of the Lloyds Bank Foundation

At the recent launch of Charity Futures, I’d say Sir Stephen Bubb, the head of the new governance and leadership programme, chose the right title by calling his lecture Charity Governance in Crisis.

But from my conversations with small charities, I’d argue that much of the debate about governance risks finding the wrong answer to the wrong question because it starts from the wrong place.

Variously cited as driven by Kids Company, fundraising problems and commerciality, the answers lie not with the unified board structures and trustee payment discussed at the lecture, but common sense, a decent ethical framework and a long-term approach towards supporter relations.

Before we fix the many for the issues of the few, let’s tease out a taxonomy for trustees – as helpfully suggested in response to Bubb’s challenge by Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations.

First for the many: the 97 per cent of charities that are small and largely local. Operating at the margins, they often depend on a small number of depleting income streams, including a 40 per cent decrease in government funding between 2008 and 2013 and face rising demand for their services.

With few staff they need great trustees to help navigate this challenging environment and spread the load, sometimes shouldering responsibilities on HR, income, strategy, communications and more. But volunteering is at their core and payment would be completely counter to their ethos. Last month, I visited Rainbow Haven, which works with refugees in Salford, and I found the treasurer doing the books – before going out to break up cardboard boxes for the recycling bin. The model may look curious, even risky, to those observing the purist executive/non-executive boundaries in larger charities but – at its best – it works.

But we also know – from the number that close – small charities carry the greatest governance risk.

The second group are the hundreds of household charity names funded largely by public donations such as Christian AidWWFMind and MS Society. They don’t have a governance problem that a sensible approach to long-term supporter value can’t, or isn’t, fixing. With their brand and reach, most attract great trustees with that perfect mix of voluntary, public and private sector experience to complement the chief executive and senior executives.

The third group is the small number of large charities that have experienced a 40 per cent increase in government funding between 2008 and 2013, deriving most of their income from statutory sources. Perhaps more akin to housing associations, industrial and provident societies or non-departmental public bodies (NDPB), these large organisations could retain their public service ethos without being charities.

Perhaps the right question for them is should they be charities at all?

As recipients of large public contracts for public services, we might all benefit if they had commercial or public body governance models. When I was chief executive of an NDPB, I was the accountable officer in law and felt the fierce scrutiny of parliamentary select committees that might seem appropriate for organisations similarly in receipt of significant amounts of public money.

Setting them aside would leave the system of trustee and charity governance unsullied for the vast majority of charities. And leave us to focus on the real charity governance crisis: the shortage of trustees.

We need more than one million trustees willing and able to be small charity trustees. But without the caché associated with big names, trustees with the right skills can be hard to find, recruit and retain. As Yvonne Hope, head of Barnabus, a charity working with homeless men in Manchester, told me: “We’re not attractive to people who don’t know us. It’s much harder to love our guys – they’re broken.”

And yet this is a problem sector leaders and the Charity Commission risk contributing to by appearing to coerce and chastise, making trusteeship sound even more onerous. Instead we should be praising, promoting, supporting and honouring the selfless unglamorous public service of the small charity trustee.

This crisis is chronic – not acute. It’s tough and a hard grind. A bit like being a trustee of a small charity.

Paul Streets is the chief executive of the Lloyds Bank Foundation. @PaulStreets_, @LBFEW

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