What does good charity governance look like post-Covid?

As charities start to prepare for life in the 'new normal' what issues should top the governance agenda for charity leaders and their trustees? Louise Thomson explores

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At the end of 2019 I channelled my inner ‘Mystic Meg’ and tried to predict the charity governance challenges of 2020. It is fair to say that when I wrote about rising levels of anxiety about risk, I was not thinking about the arrival of a global pandemic. But during the lockdown, I have given some thought as to how its impact may affect trusteeship and governance in the longer term.

Outside the NHS, I doubt many organisations had ‘global pandemic’ as an entry on their risk register. Those registers and accompanying policies will now have been hastily revised to accommodate new and different ways of working so that charities can continue to serve their communities.

Unfortunately, it is likely that many charities will not live to see the new normal of a post-pandemic society. Financial reserves will have been depleted, fundraising initiatives hobbled, sources of income harder to access. All at a time when there is an increase in the demand for the services of many charities.

Boards

For trustees, these are increasingly difficult and challenging times. Many will be keeping a close eye on the finances, staff welfare and client safety. They will also be trying to perform their duties within new technology, while also dealing with challenges to their own and their families’ health, welfare and financial security.

It would not surprise me to hear that many trustees have decided to resign in the midst of these challenges, or will do so once the worst of the pandemic is over. The role is unpaid, the hours have significantly increased during the lockdown, and risks and liabilities are very much front and centre of board discussions.

The prevalence of trusteeship has generally been of a certain gender, age and socioeconomic background. How many will now be inclined to think the risk and workload just aren’t worth the candle and there are other things they would rather do with the time they have available?

Being positive, there has been anecdotal evidence of how diverse boards have helped their charities navigate the vagaries of lockdown, coming up with new ideas to continue to deliver charitable purposes and problem solving more creatively.

Furthermore, the move to virtual meetings will not completely disappear once the lockdown has been removed (the Chartered Governance Institute has developed guidance on this issue). This may mean that those currently facing obstacles to trusteeship, might be better able to participate and contribute.

The rise of digital platforms and the move by some charities to deliver more services remotely, may also result in a calling card for younger people to join boards. Improved diversity should hopefully lead to greater resilience and enhanced governance. And not only because younger people appear to be less susceptible to the virus.

The Black Lives Matter movement has also had a profound impact on society. It would be dangerous for charities and trustees not to look again at how welcoming they are to people of colour as employees, volunteers and clients.

In short, I wouldn’t be surprised to find that the make-up of boards changes in the medium term. The challenge and opportunity is to make it last, for the benefit of the charity and wider community.

Additionally, the shorter, more focused trustee meeting has led to some improvements in the way board papers are written and presented. It is hoped that some of the positive practices generated by necessity will be finessed and taken forward, leading to more productive, insightful and valuable trustee meetings and decision making.

Regulation

The flexible and proportionate approach of the Charity Commission during the pandemic has been welcome and should be applauded. In other sectors, there may be an increase in regulation as the economy adapts to the structural weaknesses exposed by the lockdown and the challenges of trading in a new environment. I truly hope the reflective reaction to create more regulation does not unthinkingly transfer across to the charity sector.

Yes, charities do possess a unique position and they should not take their rights and freedoms for granted. However, the sector is fuelled by volunteers and goodwill, which is accompanied by decreasing levels of income. With recent Charity Commission research highlighting the public’s desire to see most of charity resources spent on the frontline, there has to be a reasoned discussion about how much of a charity’s assets is spent complying with legal and regulatory requirements. Most of those requirements are necessary to ensure charities are run legitimately and effectively. But perhaps, the post-COVID era might also bring along some of that flexibility mentioned previously and take a more proportionate approach to the regulatory burden placed on charities?

Accountability

The thorny issues of AGMs and virtual trustee meetings could really unbalance some boards, and the regulator's reasonable stance has helped trustees to focus on urgent issues while not undermining good governance.

The Corporate Insolvency and Governance Bill has produced some short-term solutions to the challenges of holding virtual meetings, late filings and insolvency practice (guidance on AGMs can be found here). However, the Bill, as drafted, does not apply to unincorporated charities, and it is unclear how these, or those established by Act of Parliament or Royal Charter will benefit from it.

The issue of AGMs is of real importance to shareholders in commercial entities. For charities, it is not such an overarching imperative. However, the role of AGMs is to provide opportunity for the board to be held to account. Within the charity sector, there have been growing calls for boards to let go of power and be more accountable. The dichotomy is challenging, but the need for greater transparency and accountability is unlikely to abate. While the corporate sector might look again at the AGM as an aspect of good governance, the charity sector might be well advised to rethink its own approach to stakeholder engagement, transparency and accountability.

Sustainability

As charities have adapted services to meet lockdown conditions, many senior managers and trustees will be assessing those activities that have worked better by utilising modern technology and seeking to develop a new way of working for the future. Some will have linked the rise in technology and homeworking to the need to move operations to a more sustainable footing. Environmental and social considerations may now be muscling their way onto the board agenda as realistic alternatives to ‘doing’ charity. What may have been seen as a ‘nice to have’ is now a catalyst for contributing to greater sustainability: for the environment, society and individual charities.

Learning lessons

The Charities (Protection and Social Investment) Act 2016 undertook to review its impact on public confidence in charities, the level of charitable donations, and people’s willingness to volunteer. Given the fallout from the pandemic, that review is probably more needed now than initially envisioned and would certainly make very interesting reading.

After the firefighting, new ways of working, thinking, delivering and contributing will develop and grow. In every sector. The crisis of the pandemic will have long-lasting repercussions for those personally affected by it, whether by the loss of a loved one, a job or a relied-upon service. The opportunity for the charity sector is to re-imagine its future and embrace the new normal, and that must include ensuring its governance is not just fit for purpose, but an enabler to delivering more, differently.

Louise Thomson is head of policy, not-for-profit, at the Chartered Governance Institute.

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