Is the payment of charity trustees inevitable?

I’m no governance expert, but I couldn’t help but take an interest in a recent news item about the Charity Commission’s open annual public meeting, where NCVO’s President, Lord (Robin) Hodgson of Astley Abbott is reported to have said “…I do believe it’s coming whether we like it or not.”  So, my question is: Is payment of trustees, even if only in large charities, inevitable?

(Note: I’m not looking at this from a regulatory perspective, if for no other reason than I’m not qualified. Current guidance on trustee payments from the Charity Commission is excellent and it’s here. Also, I’m not talking about payment of expenses, but payment for time.

Update: I’ve also had lots of feedback via email etc, including from the US – it’s in the comments below the blog…and its more interesting than my blog!)

What might be driving the move to paying trustees?
I wasn’t involved in the red tape review that I think shaped Lord Hodgson’s view on the matter, but the fact that the Charity Commission only allows payment in exceptional circumstance is clearly an issue for some: in short, the argument is that some (potential?) trustees will only carry the risk of this role if they are rewarded. These issues have certainly been aired: this excellent research from the Charity Commission is a good place to go for a considered view. By way of context, it reports 23 of the largest charities by income paid trustees in 2008. (Hat Tip: Tania Cohen)

I can think of a number of long-term changes in the external environment that would drive changes in attitudes and behaviour here:

  1. Professionalisation of the sector: the long-term shift towards the use of paid staff makes payment the norm. This norm is however tempered by the notion that professionalism is not the opposite of voluntarism, but is the opposite of amateurism. In other words, trustees think they deserve reward for their skills and knowledge, because the people they are overseeing do. This argument might imply that the leadership role of the board is more important than the stewardship role.
  2. Higher stakes: a number of charities now turn over more than £100m per annum; almost 5,000 turn over £1m. Ultimate responsibility for such complexity is perceived to be high risk – and as attitudes harden against risk taking – remuneration might be an acceptible compromise for some.
  3. Blurring of the boundaries: contracting with the public sector, adopting the habits and language of business via social enterprise models and the increase in ‘boundary-crossers’ are resulting in what academics call ‘structural isomorphism’: we are becoming more like the organisations in other sectors that we work with. And those organisations pay their non-exectutive directors. So the argument here is that trustees want comparative economic status.
  4. Greater levels of competition for a declining talent pool: I’m not entirely sure about the evidence here, but my hypothesis is that new public management led to an increase in public bodies, all of whom want trustees/non-execs. I think there is also a perceptional norm in the sector that the numbers willing to be trustees are in decline. Finally, I would hypothesise that the increasing interest of professional headhunters in placing trustees may be playing a role here (I have no evidence).
  5. It works? Not so much a change in the environment, but it’s worth asking whether the success of paid trustees might encourage other charities to follow suit. I’ve tried unsuccessfully to find published studies of the issue, but there are certainly examples where it is working, such as the Anchor Trust. This of course begs a series of different questions about the correlation between paid trustees, governance effectiveness and of course organisational effectiveness. I wont even speculate on the direction of causality should a positive correlation exist…

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But then again: 6 questions for advocates of payment
I can’t but help think that these arguments are based upon seeing the voluntary sector as a quasi-market, shaped by the same motivations and organisational dynamics as the private sector. It’s what Ramaswamy Sudarshan recently called the monetization of everything (by the way, this really is worth reading). So, before we assume any inevitability, I would like to ask some questions:

  1. Are (potential) trustees only motivated by money? NCVO, VE and Involve have just completed a two-year project – Pathways Through Participation – on what makes people get involved and stay involved. I’m happy to be corrected by the team, but I dont recall any mention of payment from an in-depth research programme. This was not, however, about trustees specifically. It’s worth noting that the work on boundary-crossers suggested some re-evaluate their values when coming into the sector.
  2. Is payment necessary to widen the pool of potential trustees to include those without time/money? I dont know, but the flaw in the argument for me is that payment is argued to be necessary for those with professional knowledge/skills – but aren’t these people those who need payment the least? And doesn’t the increasing interest in – and supply of – pro-bono skills negate the argument that payment is the only way to attract talent?
  3. What would be the impact on voluntary income? Donors are clearly comfortable with paid staff in charities (or at least that is my assumption given the ability of fundraising charities to employ paid staff). Would this shift if the people ultimately responsible for strategy and decision making benefited from their role?
  4. Would payment of trustees damage public trust in the charity brand? Voluntarism is a defining characteristic of the voluntary sector: and for some organisations, the trustee board are the only element of voluntarism in the organisation. If that goes, why should charities receive the special privileges they currently benefit from?
  5. What would be the impact on governance and management? This is the most difficult and intangible question to which I doubt it is possible to answer with confidence. I would like to see some studies about individual organisations and at a more aggregate level.
  6. Can the charities afford it? In a period of austerity, regardless of whether payment is a good thing, will that other defining characteristic of the voluntary sector – resource inadequacy – mean that this is a non-starter? Here’s a back of the envelope calculation: if the 453 charities with an income over £10m paid their trustees the same as Anchor,and we assumed a typical board of 12 trustees, that’s over £66m in costs. In the context of their expenditure this is tiny – less than half of one per cent of expenditure – so the argument might be yes, they can afford it. But is this nevertheless money leaving the sector?

You’ll find a list of pros and cons in relation to payment from a US perspective here. One American colleague said to me that “In the US it is still considered an abhorrent practice among the “governance experts.”  Which is to say that even if it is a good idea (not sure myself, but even if it is), it isn’t getting any serious airplay here.”

Some final thoughts
In writing this I am a tad worried about how little evidence I have brought to bear. I will try and do something about this and update the blog accordingly. Finally, I’m a trustee myself: my sense is that payment would fundamentally change the nature of the role and, for me, probably remove the enjoyment I get from being a trustee. I suspect many of those working in smaller organisations agree, if this research by DSC is indicative. Trustees in larger charities may well feel different – if so, I would love to hear from you.

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Karl Wilding Karl Wilding is chief executive of NCVO.

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