Full transparency vital for trust: charity executive pay report
- Tuesday, 29 April 2014 00:01
Embargoed 0001 Tuesday 29 April
Charities have been told they should publish full details of the pay of their senior executives, in order to maintain public trust. The recommendation comes in the report today of an inquiry into executive pay set up by the National Council for Voluntary Organisations.
Charities are legally required to provide an indication of the number of staff in pay bands over £60,000 in their annual report. But today’s report says they must go further and publish the exact salaries of named senior staff members in an accessible place on their websites, giving donors ‘two clicks to clarity’.
The inquiry examined extensive evidence on charity salaries, and found senior staff in charities tend to earn substantially less than their counterparts in equivalently sized private or public organisations, with a ‘charity discount’ of 25-45% at senior levels.
Nevertheless, the inquiry has recommended full disclosure of pay in order to sustain public trust. Charities have been told they should publish details about their pay in an easily accessible place on their websites – ideally no more than two ‘clicks’ from their homepage.
The inquiry panel also recommends charities consider publishing the ratio between their highest and median salaries to give an indication of pay throughout their organisation.
The inquiry has produced clear and definitive guidance on how charity trustees, normally volunteers, should go about setting senior pay, which is published as part of its report today (PDF, 1.5MB)
The recommendations and guidance have received the backing of the Charity Commission.
Martyn Lewis CBE, chair of NCVO, who chaired the inquiry panel, said:
Many of the charities the British public are proudest of are major operations employing thousands of people and managing tens or even hundreds of millions of pounds. They need highly skilled professionals in order to run to the highest standard possible and make the best use of our donations. But we believe that where they feel they need to pay high salaries in order to recruit the right people, they should be clear in explaining this to donors.
Doing this will make it clear that we believe in being open and honest with donors. We don’t want anyone ever to be able to claim that charities have hidden or obfuscated information about their salaries. I hope charities will consider this an extra opportunity to explain their work and the difference that they make.
More data on charity pay
Today’s report contains analysis of new data on high pay in charities, which shows, among other findings, that independent schools and business and professional associations, healthcare providers are the registered charities most likely to be paying high salaries. NCVO estimates that 1.9% of all charity employees earn over £60,000, compared to 4.5% of public sector employees and 6% of private sector employees. Around half of all charities that pay any employees over £60,000 are organisations less likely to be thought of by many as charities, such as government bodies with charitable status, charitable housing associations, and independent schools and hospitals.
NCVO gathered data on pay as part of its latest sampling of 10,000 charities’ accounts that it uses to create the UK Civil Society Almanac, the definitive guide to charities’ finances. NCVO will continue to collect this data and update it annually. This will provide a highly reliable and authoritative source of data on charity chief executive pay, from a large, rigorous, randomly selected sample,
overcoming the limitations of benchmarking surveys.
Charities whose income is over £500,000 are required to have their accounts independently audited. They are also required to declare the number of people paid over £60,000, in £10,000 bands, though not their names or roles, in their annual report.
NCVO announced that it would bring together trustees and others to consider the issue of executive pay and draw up guidance in August 2013.
NCVO champions and strengthens volunteering and civil society, with over 10,000 members, from the largest charities to the smallest community organisations. We make sure the voluntary sector can do what it does best.