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The Charity Governance Code refresh: what has changed?

Charities need many things to make a difference, including good people and sufficient funding, but effective leadership underpins everything and the recently refreshed Charity Governance Code is a valuable tool in striving to practise good governance.

Charities are not just a ‘nice to have’

At the outset of the second national lockdown back in November, the Onward think tank highlighted the importance of this country’s voluntary sector to our recovery and urged government to increase support.

In earlier times charities were predominantly the preserve of the privileged few, dispensing largesse to the less fortunate masses. After the pandemic struck mutual aid groups sprang into action all around the country, quicker than many established institutions could respond, showing not only a widespread community spirit and charitable impulse but also a capacity for self-organisation. Charity is now less what is done to people and more about what people can do for themselves: everyone, together, can be an agent of change and a force for good.

The greatest challenge for this country since the Second World War has only just begun: on the verge of standing alone outside a European Union of which we have been a member for the last 50 years, before the pandemic we were already one of the most unequal and centralised nations in the Western world. Charities have never been more relevant and it is more important than ever that they are fit for the tasks they face, so the recent refresh to the Charity Governance Code is timely.

What is the Charity Governance Code?

Since 2005 the Code has been developed and overseen by a charity sector steering group. It is not a legal or regulatory requirement but instead good practice for charities working towards implementing exemplary leadership and governance.

The Code consists of seven pillars of good governance:

  • Organisational purpose
  • Leadership
  • Integrity
  • Decision-making, risk and control
  • Board effectiveness
  • Equality, diversity and inclusion
  • Openness and accountability

For each principle the Code provides a rationale, highlights key outcomes and sets out recommended practice to achieve those outcomes.

Earlier this year the steering group conducted a consultation about the Code because good practice changes over time. And our times have been changing very quickly. The refreshed Code focuses on the third and sixth principles, “Integrity” and “Diversity” (now flanked by “Equality” and “Inclusion”) because feedback most consistently highlighted a need for change around these principles.

The integrity principle

This principle emphasises ethics:

“The Board acts with integrity. It adopts values, applies ethical principles to decisions and creates a welcoming and supportive culture which helps achieve the charity’s purposes. The board is aware of the significance of the public’s confidence and trust in charities. It reflects the charity’s ethics and values in everything it does.”

The key outcomes from applying this principle consistently include the board promoting their charity’s reputation by living its values and reinforcing the fundamental duty of charity trustees to act in the best interests of their charity’s purposes.

Recognising that charities are at varying stages in their efforts to fully adopt the Code, recommended practice to achieve these outcomes include the board trustees:

  • understanding their safeguarding responsibilities and going beyond the legal minimum to promote a culture in which everyone feels safe and respected;
  • making sure they regularly review safeguarding policies and procedures;
  • checking key safeguarding risks carefully and recording how these are managed;
  • ensuring that all trustees, staff, volunteers and people who work with the charity know about and have training on the charity’s safeguarding policy so they feel comfortable raising concerns where necessary;
  • identifying, dealing with and recording conflicts of interests/ loyalty (a perennial issue within charities).

At a time when the corporate world looks increasingly to “business with purpose” to deliver long-term sustainable shareholder value, charities are well-placed to lead the way in demonstrating how to deliver positive outcomes.

The equality, diversity and inclusion (EDI) principle

There is no “I” in team and no successful team comprises a group of individuals with the same strengths (and weaknesses), but instead is a collective greater than the sum of its parts.

“EDI” is a topical phrase heard every day and cynics might say that is all it is, but at its heart it reflects the age-old wisdom that no one knows everything but together we know a great deal. Put simply, addressing EDI helps a charity board to make better decisions.

The Code consultation feedback indicated that charities and boards would like more guidance on how to improve their approach to EDI and Principle 6 now recommends four stages of practice for charities in their EDI journey. Boards should:

  1. Think about why equality, diversity and inclusion is important for the charity and assess the current level of understanding.

  2. Set out plans and targets tailored to the charity and its starting point.

  3. Monitor and measure how well the charity is doing.

  4. Be transparent and publish the charity’s progress.

Especially in these turbulent times it must still be tempting for organisations struggling to keep afloat to turn to those they know, not to a stranger, for a helping hand. But the knowledge that a board is more effective because it reflects different perspectives should spur charities to continue to adapt to our ever-changing world.

Where appropriate EDI will reflect at board level the communities their charities serve, to increase legitimacy and impact. But “inclusive” doesn’t mean “comfortable” and sometimes it might be more appropriate to recruit to a board of trustees someone who doesn’t have everyone else’s experience and knowledge, a person who can question assumptions and groupthink by asking why the organisation always does things in a certain way – or even why it still does these things in the first place.

How the code can help charities in 2021

As we begin a new year, many already exhausted by 2020, another piece of guidance in the form of a refreshed Code may seem superfluous to charities overwhelmed by rising demand and diminished resources. But adopting the Code is something within a charity’s control, a practical tool enabling it to invest in itself, perhaps at little if any financial cost although admittedly with much continued effort and resolve. Adopting the Code will improve a board’s decision-making and the charity’s prospects of successfully navigating the stormy waters that still lie ahead and of enhancing its standing with stakeholders.

In recent days the Charity Commission has summed up well:

“Charities that put their purpose at the core of all they do and underpin this with robust governance and the highest standards of conduct, will serve their beneficiaries, and help meet their full charitable potential.”

The small and large charity versions of the Charity Governance Code and their accompanying diagnostic tools can be accessed here.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. 

© Shoosmiths LLP 2021.

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