In my view sound governance is key to public trust. There are also some practical examples for Trustee recruitment.
Why a code of governance?
Governance is high on the agenda in all sectors – public, private and voluntary. As voluntary and community organisation working for public benefit, we are increasingly expected to demonstrate how well we are governed. Good governance is a vital part of how voluntary and community organisations operate and are held accountable.
Other sectors have already developed Codes in recent years. Housing associations have a detailed Code prepared by the National Housing Federation. Co-operatives UK have the Corporate Governance Code of Best Practise. In the public sector, there is the new Good Governance Standard for Public Services. The private sector has its 2004 Combined Code on Corporate Governance, which builds on the work of the Cadbury, Greenbury and Higgs Inquiries over the last decade or so. Action in our sector is overdue.
This Code arises from directly expressed needs in the voluntary sector. These came from organisations which needed guidance to clarify the main principles of governance and to help them in decision-making, accountability and the work of their boards. In response to these demands, a group of voluntary sector infrastructure associations, with the Charity Commission, came together and decided to work towards developing the Code. Vitally, the Code has thus been developed by and for voluntary and community organisations.
What is ‘governance’?
One writer on governance in our sector has helpfully defined governance as being: “the systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of an organisation.”
In our sector, trustees take ultimate responsibility for the governance of their organisations. However, governance is not a role for trustees alone. More, it is the way trustees work with chief executives and staff, volunteers, service users, members and other stakeholders to ensure their organisation is effectively and properly run and meets the needs for which the organisation was set up.
The key principles of good governance
The key principles set out below have been used in the drawing up of this Code, and provide the main headings for its sections. They are set out here not as a part of the Code, but to set the context, and to help with interpretation.
Underlying each of these is the additional principle of equality – that of ensuring equity, diversity and equality of treatment for all sections of the community. We see this as fundamental to the work of all voluntary and community sector organisations; rather than creating a separate ‘Equality’ section, the principle has been used to inform all sections of the Code.
- Board leadership. Every organisation should be led and controlled by an effective Board of trustees which collectively ensures delivery of its objects, sets its strategic direction and upholds its values
- The Board in control. The trustees as a Board should collectively be responsible and accountable for ensuring and monitoring that the organisation is performing well, is solvent, and complies with all its obligations
- The high performance Board. The Board should have clear responsibilities and functions, and should compose and organise itself to discharge them effectively
- Board review and renewal. The Board should periodically review its own and the organisation’s effectiveness, and take any necessary steps to ensure that both continue to work well
- Board delegation. The Board should set out the functions of sub-committees, officers, the chief executive, other staff and agents in clear delegated authorities, and should monitor their performance
- Board and trustee integrity. The Board and individual trustees should act according to high ethical standards, and ensure that conflicts of interest are properly dealt with.
- The open Board. The Board should be open, responsive and accountable to its users, beneficiaries, members, partners and others with an interest in its work.
The Nolan principles
Selflessness: Holders of public office should take decisions solely in terms of the public interest. They should not do so in order to gain financial or other benefits for themselves, their family or their friends.
Integrity: Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their official duties.
Objectivity: In carrying out public business, including making public appointments, awarding contracts, or recommending individuals for rewards and benefits, holders of public office should make choices on merit.
Accountability: Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.
Openness: Holders of public office should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.
Honesty: Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.
Leadership: Holders of public office should promote and support these principles by leadership and example.
Board Leadership
Every organisation should be led and controlled by an effective Board of trustees which collectively ensures delivery of its objects, sets its strategic direction and upholds its values. Trustees have and must accept ultimate responsibility for directing the affairs of their organisation, ensuring it is solvent, well-run, and delivering the outcomes for which it has been set up.
Strategic direction
Trustees should focus on the strategic direction of their organisation, and avoid becoming involved in day to day operational decisions and matters. Where trustees do need to become involved in operational matters, they should separate their strategic and operational roles.
The Board in control
The trustees as a Board should collectively be responsible and accountable for ensuring and monitoring that the organisation is performing well, is solvent, and complies with all its obligations.
- Compliance The Board must ensure that the organisation complies with its own governing document, relevant laws, and the requirements of any regulatory bodies.
- Internal controls The Board should maintain and regularly review the organisation’s system of internal controls, performance reporting, policies and procedures.
- Prudence The Board must act prudently to protect the assets and property of the organisation, and ensure that they are used to deliver the organisation’s objectives.
- Managing Risk The Board must regularly review the risks to which the organisation is subject, and take action to mitigate risks identified.
- Equality and diversity The Board should ensure that it upholds and applies the principles of equality and diversity, and that the organisation is fair and open to all sections of the community in all of its activities.
- The Board should have clear responsibilities and functions, and should compose and organise itself to discharge them effectively.
- Trustee duties and responsibilities Trustees should understand their duties and responsibilities and should have a statement defining them.
- The effective Board The Board should organise its work to ensure that it makes the most effective use of the time, skills and knowledge of trustees.
- Information and advice Trustees should ensure that they receive the advice and information they need in order to make good decisions.
- Skills and experience The trustees should have the diverse range of skills, experience and knowledge needed to run the organisation effectively.
- Development and support Trustees should ensure that they receive the necessary induction, training and ongoing support needed to discharge their duties.
- The Chief Executive The Board should make proper arrangements for the supervision, support, appraisal and remuneration of its CEO.
Board review and renewal
- The Board should periodically review its own and the organisation’s effectiveness, and take any necessary steps to ensure that both continue to work well.
- Performance appraisal The Board should regularly review and assess its own performance, that of individual trustees, and of sub-committees, standing groups and other bodies.
- Renewal and Recruitment The Board should have a strategy for its own renewal. Recruitment of new trustees should be open, and focused on creating a diverse and effective Board.
- Review The Board should periodically carry out strategic reviews of all aspects of the organisation’s work, and use the results to inform positive change and innovation.
- The Board should set out the functions of sub-committees, officers, the CEO, other staff and agents in clear delegated authorities, and should monitor their performance.
- Clarity of roles The Board should define the roles and responsibilities of the chair and other honorary officers, in writing.
- Effective delegation The Board should ensure that staff, volunteers and agents have sufficient delegated authority to discharge their duties. All delegated authorities must have clear limits relating to budgetary and other matters.
- Terms of reference The Board should set clear terms of reference for subcommittees, standing groups, advisory panels, etc.
- Monitoring All delegated authorities must be subject to regular monitoring by the Board.
- The Board and individual trustees should act according to high ethical standards, and ensure that conflicts of interest are properly dealt with.
- No personal benefit Trustees must not benefit from their position beyond what is allowed by the law and is in the interests of the organisation.
- Dealing with conflicts of interest Trustees should identify and promptly declare any actual or potential conflicts of interest affecting them.
- Probity There should be clear guidelines for receipt of gifts or hospitality by trustees.
- The Board should be open, responsive and accountable to its users, beneficiaries, members, partners and others with an interest in its work.
- Communication and consultation Each organisation should identify those with a legitimate interest in its work (stakeholders), and ensure that there is a strategy for regular and effective communication with them about the organisation’s achievements and work.
- Openness and accountability The Board should be open and accountable to stakeholders about its own work, and the governance of the organisation.
- Stakeholder involvement The Board should encourage and enable the engagement of key stakeholders, such as users and beneficiaries, in the organisation’s planning and decision-making.
The Board’s effectiveness can be monitored by examining whether we have:
- achieved our aims & objectives for the preceding year
- met or exceeded the needs of our beneficiaries
- used our resources, both financial & physical, to their greatest effect
- worked within our policy framework.
Board effectiveness should be reviewed at the AGM, and would focus on:
- organisational achievement based on the above criteria
- Board interactivity, support and fit with achieving organisational outcomes.
Board tenure
The Charities tenure policy should support the Charity’s commitment to grow, and develop sustainable services at the centre of our cause, with the desire to allow ample time for trustees to:
- become familiar with the day-to-day operational work of the Charity for which the staff team are responsible
- contribute to the governance of the Charity for which the Board is responsible
- sustain a consistent approach to the strategic focus of the Charity
- arrange for cohesive succession planning for new trustees to join the Board, along with the allocation of the key roles of Chair, Vice Chair and Secretary.
- be refreshed to support the changing needs of the organisation
- ensure balance is maintained by creating a culture of trustees moving on as a positive strategy that underpins the advantages of a rolling board and sustains continuity
- encourages new people to join bringing fresh skills and thinking
- and acknowledges individual past contribution to the Charity’s success.
- The charity invites individuals with appropriate experience to join the Board of Trustees and to confirm their commitment to serve the Charity as a trustee for a period of two terms of three years.
- Designated trustees will be appointed to the role of Chair for a period of two years.
- Designated trustees will be appointed to the role of Vice Chair for a minimum period of one year, and then succeed to the role of Chair when appropriate.
- Designated trustees will be appointed to the role of Secretary for as long as possible during the remainder of their term.
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