The Amorality of Charity Governance

Sometimes someone says something that really annoys me. It’s often someone in authority; I maintain those whom pursue power are probably unsuitable to exercise it, or as I call it, a ‘powerdox’. And it’s always something so obviously unhelpful and very often wrong.

Powerdox Pundit

Today’s powerdox pundit is Andrew Hind, chief executive of the Charity Commission for his recent assertion that…

“…[the voluntary sector] should effectively take the governance as well as the moral high ground.”

I’ll be charitable and avoid the word ‘arrogance’ in describing my view of this untenable positioning of the voluntary sector. At best it is ignorance. For reasons we’ll explore here, the voluntary sector certainly can’t take the governance high ground. I also doubt its claim to the moral high ground.

Charity governance flaw

Charities have a major flaw in their governance model. The Charity Commission’s default assertion that boards should be fully voluntary fosters a dangerous separation of strategic and operational management.  I’m not suggesting this happens in all cases but I am asserting that effective relationships between strategic and operational management are achieved despite the governance model and not, how it should be, because of the governance model.  As a result, board level decision making can often lack effective operational input. Yet private sector boards are often mostly executive directors (employees) with a few carefully selected non-executive directors to add depth, experience, contacts etc..

A reality for many charity boards is that their needs from their most senior employee(s) can often push the employee(s) into the realms of too deep an involvement in board level decision making. That a system of governance can encourage an individual to break the law to work effectively hardly gives it the moral high ground; it’s amoral at best.

More charity flaws

“… the problems of charitable governance remain largely hidden from view.”

“As one funder put it, ‘If we insisted on good standards of governance, then we wouldn’t give many grants.”

These two quotes from ‘Board Matters: A Review of Charity Trusteeship in the UK’ from New Philanthropy Capital (May 2009) highlight significant governance issues in charities. The report goes on to demonstrate how charity boards lack accountability, adequate diversity and can be prone to mission drift.

“… it is not clear to whom charitable boards are accountable. Beneficiaries, funders and regulators all have some part in this, but none of these groups currently exert enough pressure on boards to improve.”

This reality is a long way away from Andrew Hind’s “governance high ground”. That he can preside over such a mess whilst making such claims surely removes any remaining right to the “moral high ground” too. This leaves charity governance where I suspect most of us know it is; in a rut!

Lessons from the wider third sector

Perhaps for better models of governance Andrew should look beyond charities to other third sector models; Co-operatives, Mutuals, Industrial & Provident Societies, Community Interest Companies and a whole variety of permutations making up the social enterprise sector. These maintain a strong connection between strategic and operational management ensuring good decision making, stewardship of assets, proper accountability and an appropriate level of risk management.

I’m thinking that perhaps social enterprise holds the governance and the moral high ground; but I’ll park that unhelpful and possibly incorrect thought!