Charity code of governance: How charities can effectively apply the key principles

With a reported loss of around 7,000 people making regular donations since the Oxfam Haiti scandal, the connection between good governance and public trust could not be clearer.

Once a term largely synonymous with the management and control of commercial companies, today there’s hard evidence that good governance is just as important for charitable organisations – if not more so. It only takes a look at recent headlines to see that poor corporate governance practices can have a significant impact on attitudes towards an organisation, or even threaten its survival. So, for a charity to perform to the best of its capabilities and maintain the trust of the public and its supporters, it is imperative that they apply good governance in line with their charitable purpose and size.

The recently revised Charity Code of Governance, launched in July 2017 and developed by a steering group of over 200 charities plus other individuals/related organisations, is part of a drive towards ensuring that charities embed governance practice into their operations. The same core principles apply to all charities but the code has a certain degree of flexibility in acknowledgement of the diversity within the sector.  For example, charities are expected to ‘apply or explain’ as opposed to the ‘comply or explain’ rule as in the corporate sector.

Despite this, many hard-pressed charities feel overwhelmed by the revised Code or do not engage fully with its implementation.

The revised Code introduces seven key principles:

  • Organisational purpose
  • Leadership
  • Integrity
  • Decision making and risk and control
  • Board effectiveness
  • Diversity
  • Openness and accountability

These qualities are, of course, key drivers of trust and demonstrate to donors, beneficiaries and the public, that the charity is effectively managing its governance responsibilities.

In the first of this series, we’ll focus on organisational purpose.

Adherence with this principle ensures the charity continues to be managed in line with the purpose for which it was set up and reminds Trustees of their role and responsibilities to the charity in ensuring this.

So what steps can charities take to ensure compliance with the organisational purpose principle?

  • Review governance procedures in place and ascertain the views of the Trustees, staff, and volunteers, to fully understand any concerns regarding the running of the charity.
  • Make sure the purpose of the charity is reinforced and reminded. This could be achieved through a principle introduction item on the agenda of all formal meetings, in addition to the preparation of a suitable agenda.
  • Review the impact of the governance procedures of the charity on the external environment and measure performance against its charitable objectives.
  • Provide suitable training to Trustees and staff members, if applicable, primarily in respect of their ongoing governance responsibilities.

    Of course, all of this takes time and expertise that many charities don’t have, so working with a trusted specialist corporate governance partner can make perfect sense.

    We’ll be exploring the remaining key principles in our series of blogs, and the steps charities can take to overcome the challenges.

    In the meantime, if you would like to find out more about what help is available, please contact us.

    Joshua Kendal
    Assistant Manager, Business Development
    Corporate & Private Clients
    Vistra UK
    Tel: +44 (0)20 3872 7367
    Email: Joshua.Kendal@vistra.com

     

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