Unexpected consequences of having the chief executive on the board

Unexpected consequences of having the chief executive on the board
Expert advice

Unexpected consequences of having the chief executive on the board

Governance | 25 Oct 2011

A chief executive questions whether it is still in the best interests of the charity for them to continue be a member of the board.

Dear editor

When changing the charity’s articles of association some years back we were advised by our then-lawyers that it would be good practice to include me as a director and trustee. The argument was that as a director I would be party to decisions, would share ownership of board decisions, thus fostering a shared partnership of governance. My then-chair of trustees who came from a commercial background where he had experience of working with boards made up of executive and non-executive directors, was very much in favour. To date this has worked well but we are currently revising the articles and in particular reducing the board size from 28 to a more manageable 12.

Recently, we have been refused support by a major foundation stating that we have a ‘paid’ director as the reason. There is also potential negative reaction from volunteer supporters to the declaration in the annual report of directors’ remuneration.

What do you advise?

Yours sincerely,

A chief executive who wants to do what’s right for the charity

Dear chief executive

Until fairly recently, it was rare for a paid chief executive of a charity to serve as a trustee. However, new social enterprise models such as community interest companies have blurred the boundaries between the charity and commercial worlds, and it is no longer such a rarity.

As a funder, we would not automatically rule out supporting a charity whose board included members receiving a salary from the charity. We would, however, want to be satisfied that the arrangement was authorised by the charity’s constitution or by the Charity Commission. We would also need to understand the extent to which a grant might lead to an individual board member receiving any form of benefit from the charity and, if so, how the conflict of interest might be managed. We would be particularly alive to the danger of that individual exerting an excessive influence on the charity.

However, funders adopt a variety of approaches to this issue and, as you have learned, some take a stricter line. As a charity trustee, you are under a legal duty to act in the best interests of the charity. In this scenario, this will involve weighing the benefits to the charity of you continuing on the board against the problems of perception among funders and other stakeholders (including your volunteer supporters).

As well as reviewing the size and skills set of your board and your articles of association from time to time, it is also good practice to refresh your board members regularly (in fact an increasing number of charities now have fixed terms of office for trustees). If you have served for a number of years, now may be a good opportunity for you to reconsider your membership of the board.

Yours sincerely

Bharat Mehta, chief executive, Trust for London   


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