To pay or not to pay

Strong and dynamic societies need a plurality of institutional forms to flourish. But that plurality is not best served by preserving those forms in aspic. They need to modernise while maintaining their most important distinguishing features.

Over the last few years I have been approached by head-hunters asking me to put my name forward to chair a charity. Some approaches haven’t interested me but a couple have, partly because of an enthusiasm for the charity, but also because I felt that there would be some synergies with my role at the RSA.  But further conversation about the options has stopped abruptly when I have asked whether the charity would reimburse the RSA for my time.

Other than for charities which have specific permissions, the process to reimburse trustees (or their employer) is bureaucratic and few charities are willing to consider it. Thus the invitation to chair the board would require either that I reduce my contracted hours at the RSA or that the RSA effectively subside another charity by paying me for the two or three days a month required at minimum to be an effective chair. As I have now been approached and have refused on several occasions, I have been reflecting on the pros and cons of trustee remuneration.

In a thoughtful and authoritative speech at the RSA last week Dan Corry, chief executive of New Philanthropy Capital, challenged the third sector to address its problem with low productivity.

As Dan said, governance is clearly an issue. Without the services of unpaid volunteer trustees (like those of the RSA Board) the third sector could not function. However, the combination of voluntarism and the cumbersome nature of much governance can undoubtedly be impediments to charities being as focussed and productive as they should be. One result is that innovation in philanthropic organisation is largely taking place through new forms which are either explicitly private sector (for profits with social purpose) or which are closer in their governance to the private sector than traditional third sector governance (social enterprises).

It is an important responsibility of the executives and boards of charities to take opportunities to modernise governance arrangements. This isn’t easy: governance reform not only risks distracting leaders from the core purposes of the organisation but can cause controversy and act as a catalyst for various groups opposed to the direction taken by the charity to organise a revolt.  Trustee compensation might be an important dimension of modernisation.

Eighteen months ago civil society minister Nick Hurd rejected a proposal arising from a review of charity governance by Lord Hodgson to make it easier for charities to pay trustees.  In doing so the minister was siding with two of the peak third sector organisations (NCVO and NAVCA) against a third (ACEVO).

The argument against remuneration has various elements: first, that there is no problem to be answered; charities can and do find good trustees willing to work hard for nothing. Second, it is argued that the public – on whom charities rely for legitimacy and income – would be opposed to trustee remuneration. Finally, there is concern that allowing some large charities to remunerate trustees would be the thin end of the wedge, leading to an expectation that all charities should pay and also to an escalation in payment of the kind we are all too used to in the private sector.

These are all legitimate arguments although the second and third could be substantially addressed by having strict limits on the scale and scope of remuneration. When it comes to the quality of trustees those advocating more scope for remuneration should be clear that wanting to expand the pool of available talent is not an implicit criticism of those currently performing the role. The RSA has a strong Board and a great (unremunerated) Chair in Vikki Heywood but that doesn’t stop me being an advocate of greater freedom to compensate trustees.  Let me explain why.

The potential risks of trustee compensation need to be stacked up against the consequences of not doing so. First, this does obviously reduces the pool of potential trustees and chairs of trustees and introduce a strong bias towards older, retired or semi-retired, members. Second, it means that any working trustee who takes on the role will feel considerable pressure to try to keep their trustee commitments to the minimum because of the uncompensated impacting on their day job. Third, it makes it less likely that senior executives in one charity could be trustees of another even though performing both roles might increase understanding and the sharing of good practice between executives and trustees in each organisation and across the sector as whole.  Fourth, the block on remuneration may be a factor leading to more business-like new charitable forms being preferred to ones which involve democratic forms of accountability

It is this last point that concerns me most. Membership voice and democratic accountability are important aspects of the charitable sector and its contribution to civil society. But unless we do all we can to make these forms modern and effective, they may wither away in favour of social businesses. Those who oppose reforms such as making it easier to compensate working trustees are in danger of protecting the purity of one model of governance at the expense of that whole model becoming marginalised.