Major overhaul for charity governance code

A consultation has opened today on a significant new version of the charity sector governance code.

The code, a tool to help charities strengthen and develop their governance, was originally created in 2005.

This major overhaul, launched at the start of Trustees Week 2016, sees new and more detailed guidance included in the code, with an enhanced focus on delivering organisational purpose and direction.

Those with an interest in charity governance are being asked to feed back their views on the code. The consultation runs until Friday 3 February 2017.

Proposed new features include the following recommendations.

  • Boards will use the code as a tool for continuous improvement, rather than simply as an aide to meet minimum standards
  • Boards promote a culture of prudence with resources but also understand that being overcautious and risk averse is itself a risk
  • Boards take account of the wider voluntary sector in making sure that their charity operates responsibility and ethically
  • Boards regularly review the external environment and assess whether the charity is still relevant. The code recommends trustees consider partnership working, merger or dissolution if others are seen to be fulfilling similar purposes more effectively.

The code also proposes higher standards in a number of areas, including the following.

  • Increased expectation in relation to aspects of board composition, dynamics and behaviours with explicit good practice recommendations about board size, frequency of board performance reviews, and trustees' terms of office.
  • A new emphasis on the chair’s role in promoting good governance
  • Emphasis on board diversity, supporting its leadership and decision-making with a recommendation that larger charities publish an annual statement of the steps they have taken to address the board’s diversity.
  • A presumption that charities should be open in their work, including a public register of trustees’ interests, unless there is good reason not to.
  • Recommending that charities use their annual report to say how they apply the code and an explanation of any aspects which they do differently.

Rosie Chapman, chair of the code steering group, said:

Everything the code does is about putting in place the processes and behaviours that mean charities will be better able to deliver their purposes. This version of the code starts from the principle that trustees understand their role and are interested in helping their organisations develop further. We want the code to act as a tool for continuous improvement for charities of all sizes, including those who are already operating to high standards in governance.

With this in mind this draft code contains some stretching objectives, but we believe they are all achievable. Nevertheless, we have worked to ensure that the code is equally relevant to those who are just at the start of a journey to improve their governance processes. Once the code has been finalised we plan to create resources to help charities implement its recommendations.

We know that some of the code’s proposals would mean significant changes for some charities, so we want to talk to as many people as we can during the consultation. We are keen to hear views on whether we have achieved our aim of a charity governance code that will equip charities for the challenges and opportunities of the coming decade.

Sir Stuart Etherington, chief executive of NCVO, said:

The new draft of the good governance code accounts for changes in law and practice, as well as better reflecting today’s expectations of charities. The code encourages charities to think about the ways in which they can go beyond the minimum necessary to achieve more and to demonstrate how they apply the standards expected of charities. It is a collective contribution to strengthening governance in the sector and supporting trustee boards to best achieve their organisation’s purposes.

Becca Bunce, policy and engagement manager at Small Charities Coalition, said:

At Small Charities Coalition, we know that people in small charities are passionate about their causes, and often can feel overwhelmed by governance paperwork.

With the rewriting of the governance code we hope that small charities will find the code simpler to engage with, clearer about applying in a proportional way and find that it supports them to keep doing their good work.

We encourage small charities to engage with the consultation process and give their feedback to make sure it works for them.

Louise Thomson, head of policy at ICSA, The Governance Institute, said:

The Governance Institute welcomes this consultation on a new code of governance for charities. As a committed and experienced contributor to good governance across the sectors, we urge trustees, charity secretaries and other governance professionals to engage with the consultation. This will help to shape the final code so that is accurately reflects what good governance should look like in charities. Good governance is not a luxury, but an essential factor in any successful organisation.

Asheem Singh, interim chief executive of ACEVO, said:

ACEVO welcomes the opportunity to consult on an updated code. The golden rule of charity governance is that charity is delivered at the front line but it begins in the back office. This new version aims to reflect the growing recognition that skills, behaviours, support for leaders, and the quality of relationship between trustees and executive teams in charities are as important to good governance as procedures and protocols. We particularly look forward to a full debate on these points in the coming consultation.

Rosalind Oakley, executive director at the Association of Chairs, said:

We welcome the revised code and believe it will assist boards to keep improving their governance. We particularly welcome the emphasis on the important role of the chair, which has often been overlooked.

Ruth Marks, chief executive of Wales Council for Voluntary Action, said:

WCVA is pleased to support this new, bilingual, draft Charity Governance Code and we would encourage all our members to take part in the consultation process.

Trustees are vital to the good health and smooth running of charities, and we need to encourage more people – and a more diverse range of people – to take up these sometimes challenging and demanding responsibilities.

One of WCVA’s key priorities for the future is to ensure that charities and volunteers are valued and are trusted by the public. Having the right people at board level can help ensure this.

Paula Sussex, Chief Executive of the Charity Commission, said

Good governance is at the heart of a well-run, effective charity and the governance code is a key tool for trustees. The new code encourages trustees to do more than just meet minimum requirements – it will help trustees go above and beyond to excel in their role and provide strong leadership across the sector. I would encourage trustees to contribute to the consultation to share their thoughts and expertise on this important piece of work.

Notes

The charity governance code is overseen by a working group comprising ACEVO, ICSA, NCVO, SCC and WCVA. The group has an independent chair, Rosie Chapman, an experienced governance consultant, who fulfils the role on a voluntary basis. The Charity Commission are an observer to the group.

The code’s name will change from Good Governance: a Code for the Voluntary and Community Sector, to the Charity Governance Code.

The draft code and consultation questions are available at www.governancecode.org.

The steering group are grateful for the financial support of the Clothworkers’ Company.

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