The Regulator for Charities in England and Wales

Trustee remuneration: views from the sector

(March 2008)

Charity Commission seminar, 7 November 2007

Contents

Summary

The question of whether or not to pay trustees continues to be the subject of much debate in the sector. The Charity Commission, as the body which can authorise the payment of trustees in certain circumstances, has a unique role in this area and it is vital we remain up-to-date on current thinking in the sector.

In order to hear from charities about their perspectives on the legal and policy framework around trustee remuneration, the Commission held a seminar on 7 November 2007.  Introduced by the Commission's Chair, Dame Suzi Leather, the 50-strong audience heard from six charities about their experiences, before debating the issues in groups. 

The Commission would like to thank everyone who attended and contributed to the conference, particularly the charities who gave presentations.

A summary of the day’s discussions can be found below:

Charity Commission overview

Rosie Chapman, Executive Director, Policy and Effectiveness, set out the legal and policy framework informing the Commission’s position on trustee remuneration, and also some of the findings of our initial research into the instances of trustee payments.  You can view Rosie’s presentation pdf icon small on our website.

It is a fundamental common law principle that no trustee shall receive any benefit (be it property, goods, services or money) from their charity without express authority in a governing document, by statute, or by the Charity Commission or the Court.

Our guidance Payment of charity trustees (CC11) sets out our policy and procedures. An interim information sheet regarding a new power introduced by the Charities Act regarding payment of trustees for goods or services (see below) will be published in March 2008, to coincide with the implementation of that part of the Act.

Payment for goods or services

Currently, unless there is a suitable existing power within the charity’s governing document, charities that wish to pay trustees for goods or services must approach the Commission for authority.

A new power in the Charities Act 2006 (due to come into force in early 2008) means there will be no need for a separate power in a charity’s governing document, or for our authority, for a trustee to be paid for providing goods or services, provided certain conditions are met (see Rosie’s presentation pdf icon small for more about the conditions). See also the information sheet giving guidance on this new provision.

Payment for being a trustee

The new provisions in the Charities Act 2006 do not cover payment to trustees for being trustees – an express power is still needed.  Where the Commission’s authority is required, a strong case will need to be made, highlighting how the payment is in the clear interests of the charity, and how the benefits of making the payment outweigh any disadvantages, including the need to manage conflicts of interest.

Payment for loss of earnings

Where an employer is not prepared to pay an individual for time away from their work to carry out trustee business, or an individual is self-employed, some charities may consider paying those trustees for loss of earnings.  The same principles apply as for payment for being a trustee – unless a suitable power exists, the Commission would need to provide authority for such payments, and we would need to be satisfied that payment is in the interests of the charity.

What our initial research tells us

We have conducted some initial research into the instances of trustee payments by looking at the accounts and governing documents of the top 100 charities by income. See the updated details of that research.

Session 1 – the benefits of trustee remuneration

In this session we heard case studies from three charities outlining their experiences of the benefits of paying trustees.

Anchor Trust (see Anchor Trust’s presentation pdf icon small )

Anchor Trust describes itself as England’s largest not-for-profit provider of housing, care and lifestyle options, with the aim of improving the lives of older people.  It has an annual turnover of £247.4 million and is a Registered Social Landlord. 

In 2003 the Charity Commission authorised the remuneration of all of Anchor’s trustees.  The level of remuneration is in line with the levels determined by the Housing Corporation.

Jane Ashcroft, Managing Director for Care Services, explained that Anchor Trust had taken the decision to pay its trustees to attract experienced non-executive directors and to recognise the scale of the responsibility of being trustee of such a large and complex organisation.  They have received excellent responses in recruitment campaigns and the trustee board scored highly in an independent review of their effectiveness, carried out by ICSA.  In addition, they have found that paying trustees has led to improved attendance at meetings and has contributed significantly to organisational success and development.

CfBT Education Trust

CfBT Education Trust is a leading education consultancy and service organisation.  In 2006 the Charity Commission authorised the remuneration of a minority of the trustees (as chairs of specialist committees), having previously authorised payment to the chair in 1993, as well as authorising the charity to employ one of its trustees as a consultant in the same year.

Neil McIntosh, Chief Executive, asserted the importance of remaining true to the principle that a majority of a charity’s trustees should be unremunerated, but questioned whether that makes it necessary for all trustees to be unpaid.  CfBT Education Trust ensures the differences in the roles of the unremunerated and remunerated trustees are clearly set out.  Neil also explained the importance of being clear about the higher expectations placed on paid trustees.

RNIB

RNIB describes itself as ‘the UK’s leading charity offering information, support and advice to over two million people with sight loss’.  RNIB has 24 trustees, five of whom the Commission has authorised payments for loss of earnings (which the Commission views no differently to payment for being a trustee, and must be reported as such in the charity’s accounts). 

Lesley-Anne Alexander, Chief Executive, explained that RNIB feels that charities should have an overt power to decide whether to remunerate trustees. The increasing pressure on trustees’ time, the increased responsibility associated with being a trustee, and the drive to professionalise trusteeship means that more charities may see remuneration as an attractive option.  Lesley-Anne went on to say that the increased competition for attracting the best trustees, combined with drives to increase diversity (of age, gender, ethnicity, location, etc.) also contribute to the arguments in favour of paying trustees.

Session 2 – the benefits of a voluntary board

In this session we heard case studies from three charities outlining why they felt it is important not to pay trustees.

MHA Care Group

MHA Care Group provides care homes, housing and support services for older people throughout Britain, delivering a range of services to over 12,000 individuals.

Roger Davies, Chief Executive, outlined what MHA sees as the benefits of having a voluntary board.  He argued that high calibre individuals will be willing to serve unpaid if they believe in the charity.  Unpaid trusteeship is an inspiration to volunteers throughout the organisation. MHA also feels that paying trustees may be a disincentive to giving for some donors and that having a voluntary board ensures a clear perception of an organisation run by individuals who are committed to the charity’s mission, with no other incentive to doing what they do.  Roger also stressed the importance of board members not being dependent on executives for their remuneration, thereby ensuring independence in decision-making and holding executives to account.

Oxfam

Oxfam is a development, relief, and campaigning organisation that works with others to overcome poverty and suffering around the world.  Alongside paid staff, Oxfam works with more than 20,000 volunteers. 

Making the distinction between compensation for loss of earnings and payment for being a trustee, Angela Sealey, Vice Chair argued that public trust is essential to the success both of individual charities and the sector.  Inextricably linked to public trust are the values the public associate with charity – voluntarism amongst them.  Angela highlighted the importance Oxfam has found in motivating their volunteers through setting the voluntary ethos at the very top of the organisation. 

Angela argued there is little evidence paying trustees would resolve problems in recruiting trustees. Oxfam feel that motivation, dedication and voluntarism are key attributes of trusteeship; attributes which are essential to the smooth running of the charity, as well as to maintaining public confidence in the value of charity.

Sense (See Sense’s presentation pdf icon small )

Sense is a national charity that supports and campaigns for children and adults who are deafblind.  Sense aims to ensure at least half of its trustees are either deafblind themselves, or family of deafblind people. 

Katia Herbst, former Chair, argued that voluntary trusteeship is an important distinction between the charitable and the private sectors.  She also stressed it is important to public trust that donors can be confident that any donations they make go direct to the purpose of the organisation. 

Sense relies on a number of methods to ensure a broad mix of trustees is maintained, and that they are not ‘out of pocket’ for time spent on their trustee duties, and recommended that other charities do the same. Katia concluded by looking at the issue of parity within the sector, where some charities are able to pay trustees and others not, particularly in terms of competing for highly qualified trustees.

Delegate discussions

We were delighted the presentations led to lively and wide-ranging discussions of the issues, key themes of which are drawn out below.  Please note this is a summary of the discussions held on the day, and does not necessarily reflect the opinions of the Charity Commission or the wider charity sector, nor is this an exhaustive list of all of the issues.

Source of funding

Some delegates argued for a distinction between bodies funded by public sector contracts, and those directly funded by public donations. This view was countered by others who felt funding sources should not dictate whether a charity is seen as more, or less, deserving.   

The importance of charities’ independence from government, led by their trustees, was raised by a number of delegates. Some expressed concerns that where charities receive all their funding from government and pay their trustees, their independence may be called into question.

Regulatory approach

Several delegates made the point that, given the diversity of the sector, there cannot and should not be a ‘one size fits all’ approach to the issue of trustee remuneration.

One delegate suggested charities might be allowed to pay their trustees as a general rule, but only up to a sum specified by the Commission, either as a finite amount or as a percentage of turnover, which would then have to be justified in SORP accounts. If donors feel this is unreasonable, then they will not give to that charity, so this would in essence be a self-regulating model.

Public perception

Some delegates argued that, as the sector changes and becomes increasingly professional, it is important its underlying values are preserved to ensure continuing public confidence. 

A number of delegates noted that, as members of the public, they themselves would think twice about giving money to a charity that paid its trustees.  Others were less sure what the public’s opinion on trustee remuneration is, and therefore whether paying trustees would necessarily have a negative impact on the wider reputation of charity. Some felt more research was needed into the public perception of charity before we could properly assess the real impact of trustee payment.

It was noted that negative press coverage of trustee payment could make it an issue for the public, particularly where the public may already be worried about administrative costs.

Motivation

It was recognised there may be many different motivations behind deciding whether or not to pay trustees.  A number of delegates stressed the underlying argument has to be whether it is in the best interests of the charity, regardless of a charity’s financial and lawful ability to pay trustees.

Some charities queried whether paying trustees, even if very small amounts, was an effective way of recognising the importance of their contribution to a charity.

Other delegates queried whether becoming more ‘professional’ and ‘modern’ necessarily means paying trustees. Several delegates stressed that whether trustees are paid or not does not equate to them being either ‘professional’ or ‘amateur’ – all trustees are professional.  It was argued that charities can still deliver services at least as well, or better than, the public or private sector.  

Some delegates felt that having to compete for the best trustees with other organisations (including non-charities) that are able to pay trustees could lead to an unfair disadvantage for those who cannot afford to pay. 

Governance standards

The Trustee Act 2000 places a higher duty of care on trustees who are paid, on the basis of their special knowledge or experience, and they may be held accountable if a loss is incurred as a result of a failure to exercise that level of expertise.  Some delegates felt, however, that all trustees had an equal duty of care, and that trustees who are not paid should not feel any less responsible for actions on behalf of their charity.

It was stressed that any decision to pay trustees should be open and transparent at all stages and that proper management of conflict of interest is essential. 

It was noted in particular that small or medium-sized charities can find it difficult to recruit trustees and some delegates suggested that to overcome this, they might consider modernising their recruitment processes (by advertising vacancies online or in the press for example) and targeting specific areas where a gap has been identified. It was also suggested that to hold on to good trustees and improve governance, trustees should have access to development opportunities and training and a strong executive needs to be in place in order to support the trustee board effectively. 

Voluntary ethos

Some delegates expressed concern that paying trustees could damage the voluntary ethos of the charitable sector. One delegate, however, felt the sector can be “self-righteous” about the payment of trustees, and should recognise there is more than one model to deliver services effectively; it is up to individual charities to decide what is right for them, provided it is within charity law. 

There was also some concern that the ‘fraternity of the charity sector’ might be damaged by creating a potential disparity between paid and unpaid trustees.

Diversity

Delegates queried whether paying trustees could, in fact, improve diversity of trustee boards – particularly in terms of attracting younger people, those from minority ethnic BME backgrounds, or people with disabilities. 

Some felt that further research was needed into whether diverse boards are more effective than non-diverse boards. 

It was questioned whether paying trustees could actually help attract the right people from the desired backgrounds, and if not, whether other incentives would be a better attraction. Some delegates were concerned that, if paying trustees was the key to attracting a diverse board, would this mean diversity is only achievable for charities that can afford it?

It was generally agreed that a sensible first step to attracting a diverse board is to have proper open recruitment procedures, aimed at the sections of society the charity is trying to reach. 

It was suggested that other methods, such as flexible and adaptable meeting arrangements, improved trustee expenses procedures, and enhanced support arrangements, would be more successful in attracting and holding on to good trustees from diverse backgrounds. 

View the summary of recent Charity Commission research into trustee payments on our website.