Transparency will help maintain trust in charities

Today we’ve published the report of the inquiry into senior executive pay (PDF, 1.6MB), which NCVO established last year, and which I chaired.

The inquiry panel heard the views of many people with an interest in sector pay, including hundreds of responses from NCVO members, for which we were very grateful. We also examined new data on high pay in the sector, gathered by NCVO as part of its latest work on the UK Civil Society Almanac.

We have made a number of recommendations, which we believe will protect public trust in the charity sector. We have recommended:

• that charities with an income of over £500,000 publish the total remuneration, names and titles of senior executives
• that they also publish an summary of the rationale of their trustees in arriving at decisions on senior pay
• that they publish this in an easily accessible place on their website, ideally no more than two ‘clicks’ from their homepage
• that these larger charities also adopt clear pay policies.

While we place extra importance on these recommendations for larger charities – £500,000 is the threshold above which a charity’s accounts must be independently audited – we hope that smaller charities will also given consideration to whether they may be able to follow them too.

Modest recommendations that will make a difference

I believe that what the inquiry has proposed is moderate and achievable, yet will be effective. We have also produced definitive guidance for trustees on how to go about setting senior executive pay.

Some will have hoped that we would go further. Others will think we have already gone too far. But many organisations already provide such information (see the BBC’s for example), and the sky has not fallen in on them. It is not sustainable for us to be less open and transparent than other organisations – we should be aiming to set a gold standard in voluntary transparency.

What more could we have done? Some suggested we propose rules to cap the pay permissible for charity staff. These were well intentioned calls and I believe we owe those who made them an explanation of our reasons for not taking this route. Aside from the practical issues of creating a barrier for those who need to recruit specialist staff, I think we let government dictate rules to charities at our peril. We are at our best when we live up to our own standards, because we believe they are the right thing to do, not those devised at the whim of a minister aiming to score a political point.

That said, we see no excuse for profligacy, and we warn all those with charitable status now that we are prepared publicly to challenge them if we suspect it. We are not willing to tolerate threats to the public’s trust in charitable status.

The inquiry has been conscious all along that only around 1% of all charities pay anyone over £60,000. (And most of course don’t employ any staff at all.)

Larger charities have an extra responsibility

But among the £10m+, household-name charities, who benefit from around half of all donations and whose actions do much to drive public opinion, nearly all have employees over £60,000. Given their privileged position and the trust and authority they enjoy, they have a particular responsibility to act to the highest standards. We have not proposed extra regulation to mandate our recommendations. But I believe these larger charities in particular will find it hard to explain why if they do not follow them. Importantly however, I want them to consider this an opportunity to help donors understand the scale and challenges of their work.

And I don’t want anyone to ever be able to accuse us of hiding or obfuscating information on pay in an attempt to avoid embarrassment. If we are up-front about pay, we can avoid this dangerous accusation.

I hope you will feel able to support the inquiry’s recommendations. We have produced a quick guide to the key recommendations (PDF, 65KB) which you may like to see.

Download and read the full report (PDF, 1.6MB)