This year, the news has been so full of charity doom and gloom that we’re in danger of hunting good trustees to extinction. But recruiting a good board is now more important than ever.
New research published by the Charity Commission provides a detailed backdrop to this picture. The report, Taken on Trust, found that trusteeship in the UK charity sector is worth £3.5 billion a year, with the average trustee contributing 4.88 hours per week.
The report found that around 120,000 new trustees are recruited every year. There are, however, 150,000 fewer trustees than previously thought. There are roughly 700,000 trustees in England and Wales, meaning that the average trustee sits on 1.35 boards. It follows, therefore, that around 1.3% of the population is currently a trustee (rising to 5.5% among retired men). The median length of service for a trustee is around five years, with trustee tenure longest in the smaller organisations. In the largest charities, median tenure is between three and four years.
A lack of formal training
Alarmingly, although trustees play a governance and executive role in some 80% of (mainly smaller) charities which have no paid employees, the report found that only 9% think training is very important. In most cases, their primary reference point for information is their peers, which has led to concerns that many boardrooms are echo chambers in which trustees merely reinforce each other’s views. Moreover, relatively few boards assess their effectiveness, only 12% of trustees have a formal induction, only a third have a job description, and very few have appraisals.
On the positive side, perhaps, 82% of trustees are confident of their legal and financial responsibilities. However, a second survey of providers of services to trustee boards provided a much less rosy picture, with many believing that trustees lack knowledge and skills. Only 24% of boards have the skills to avoid fraud, highlighting some serious skills gaps with this and other legal, fundraising and digital issues. Indeed, just 40% say they have sufficient skills in governance, arguably the board’s primary function.
The trouble with trusteeships
A year ago, nfp Synergy’s National Trustee Survey found that trusteeships are characterised by long hours, limited training and rising requirements. In the wake of the Kids Company scandal, the survey found that around one quarter (27%) of trustee respondents had thought about stepping down due to the requirements of the role, while 23% thought the pressure had become too much. Additionally, 71% felt that the requirements of trustees were increasing. And thus, it turned out indeed.
Both HMRC and the Charity Commission have tightened their criteria around trustee responsibilities, including: beefing up the ‘fit and proper persons’ requirement (such that anyone involved in a disputed tax-avoidance scheme and anyone who has been previously been removed or disqualified from acting as a charity trustee by a charity regulator are now in the firing line); issuing revised guidelines for trustees on financial matters; and a revised Governance Code centering around seven principles (organisational purpose; leadership; integrity; decision-making, risk and control; board effectiveness; diversity; and openness and accountability).
Certain issues regarding trustee boards have merited further investigation:
Unrepresentativeness of board members
A recent report from the charity Getting on Board found that 59% of charity respondents said their boards were not representative of the communities they served. The Taken on Trust report backs this up, showing that the average trustee is likely to be male, 60 years of age or older and white.
The latter report warns that boards 'do not reflect the communities charities serve', and the lack of diversity leaves the sector at risk from ‘myopic’ decision making. These issues are becoming ever more important to policy makers and funders, with funders increasingly looking at board composition as part of their potential fundee assessment.
The Getting on Board report found that most charities recruit trustees by word of mouth, and almost half do not even advertise board vacancies on their own websites. The report concluded that such outdated and unprofessional trustee recruitment practices are seriously threatening the efficacy of charities in the UK.
The Charity Commission’s Taken on Trust report found that only 5% of trustees are recruited openly; nearly three-quarters (71%) are recruited through informal networks, and only 5% are recruited via a public advert. Notwithstanding, the research found that diversity is generally worse on boards with a higher level of formal recruitment.
Supporting the board
The second Taken on Trust report found too few board members seek external support and that the market for trustee support is not functioning effectively. Issues arise both with the demand for support (trustees being unaware of the gaps in their own skills and knowledge) and the supply of support services (support not being provided in the right ways, or not being marketed due to fear of creating too much demand).
Solving the trustee board problem
A number of potential solutions have been posited to the trustee recruitment and retention problem.
Getting on Board have started a trustee recruitment campaign to change trustee recruitment practices and encourage charities to open their vacancies to a much wider audience, primarily appointing trustees on the basis of experience, diversity, empathy and knowledge, to improve practices and in doing so create strong, diverse boards to lead their work.
ICSA: The Governance Institute has published guidance for charities about recruiting trustees, warning that the failure to recruit trustees appropriately is a breach of trust.
Paying for the privileged
And finally, the age-old issue of whether paying trustees would resolve some of these issues has raised its head once more. The Charity Commission research, Taken on Trust, revealed that more than 2,000 charities pay trustees (representing 1.6% of all charities). The research found that paying trustees becomes much more commonplace as charities get bigger, with 7.4% of charities with annual incomes over £5 million paying their trustees. Previous research has found that 16 of the largest 100 charities paid at least one trustee, although some were paid for duties other than trusteeship.
But whether money really can buy you confident, knowledgeable, financial and risk-savvy trustees is up for debate. Sir Stephen Bubb, Director of the leadership and governance programme Charity Futures, has been quoted as saying he believes the sector is in a dangerous position, with the Charity Commission coming down so hard on the regulation side. This is scaring good people away from taking on the liabilities which come with trusteeship, without providing the necessary support safety net.