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Sector leaders criticise Lord Hodgson proposals on paying trustees4

Governance | Vibeka Mair | 17 Jul 2012

Sector leaders have been near-unanimous in their criticisms of Lord Hodgson's proposals to pay trustees, highlighting that umbrella body Acevo was the only sector body to argue for it during the Charities Act review.

Yesterday, Lord Hodgson, in his official review of the Charities Act 2006, recommended that charities with annual income of more than £1m should be able to pay their trustees without seeking permission from the Charity Commission.

The proposal has been warmly welcomed by Acevo chief executive Sir Stephen Bubb, who said he expects “whingeing on trustee pay”, but insists the move is correct:

“This has to be right,” he says. “If a charity believe it needs to pay (not large sums let’s be clear!) then why should they not do so.

“I suspect the majority of Acevo members will not take advantage of this flexibility but for those that have problems in recruiting and retaining the best, why forbid them?”

But, charity law experts Bates Wells and Braithwaite have noted that this goes against the tide of opinion in the charity sector. Sector bodies NCVO, Directory of Social Change and Navca have all voiced strong opposition to the move:

“As far as we are aware,” said Rosamund McCarthy, a partner at Bates Wells and Braithwaite, “apart from Acevo, submissions from the main sector bodies (and indeed our own) argued that the present regime worked well and there was no clear evidence that extending powers to pay would either improve recruitment or lead to better governance.”

McCarthy notes that if the proposal is implemented there will need to be strong safeguards such as regular review of arrangements, and clear guidance from the government and the Charity Commisson on how conflicts should be managed in relation to setting salaries and, monitoring performance.

Two-tier sector

Commenting further on the proposals to pay trustees, Alana Lowe-Petraske, a charity solicitor at Withers, suggests it will lead to a two-tier sector and more chief executives sitting on trustee boards:

“An outcome of this proposal would be that it would be more acceptable to have a paid CEO sit on a trustee board,” she said.

“However some feel that the split between the CEO, who leads implementation, and the chair is the cornerstone of good governance.”

Lowe-Petraski also warns a two-tier sector could emerge: “Where trustee payment becomes the norm rather than the exception in larger charities, it may be increasingly difficult for larger charities who do not wish to pay trustees (or only some of them) to avoid a new trustee expectation. This may lead to a 'two-tier' sector where trustees at smaller charities are generally volunteers and those at larger ones are generally paid.”

Charity Commission research from 2008 showed that nearly a quarter of the top 100 charities by income already paid at least one trustee for their trustee role.

Arguments for and against

This includes the charity Nuffield Health, which currently pays its chair £20,000 a year for his role. Speaking at a recent debate held by New Philanthropy Capital on the payment of trustees , Debra Allcock-Tyler, chief executive of the Directory of Social Change, highlighted this payment to argue against payment of trustees:

“Nuffield Health’s chair is a millionaire. How the hell can you talk to volunteers and donors and say some of it is going to multi-millionaires?” she asked.

But, before taking on the Charities Act Review, Lord Hodgson had argued that the responsibility of governing a large and complex charity such as Nuffield Health should warrant payment: “We have situations where the chief executive's pay is £150,000 and trustees are thinking ‘I supervise him for nothing’. It is an issue of risk and reward,” he said.

Twitter has already been awash with comments on the payment of trustees and there is sure to be much more debate as the logistics of Lord Hodgson’s proposals are worked out.

There are many strong arguments for and against the payment of trustees. Below are some of the oft quoted ones. What’s your view?

For, the payment, in general, of trustees -

It will increase the diversity of trustee boards. Dianne Jeffery, chair of Age UK, says: “Trustees are currently unpaid. This could rule out a whole raft who might have an awful lot to offer – we will never know. Committed, enthusiastic people – like my children for example – simply cannot afford to take on such a commitment.”

There is no evidence that paying trustees increases diversity. Studies in similar areas show it can actually decrease diversity. Anne Moynihan, a charity consultant, says: “A piece of research from Oxford Brookes University found the professionalism of housing association boards had created a tension between unpaid board members and paid board members. Paid board members being brought in are increasingly becoming elite volunteers, who are predominately male, graduate, professional managers.”

Against,the payment, in general, of trustees -

Importance of the voluntary ethos of the sector. Peter Lewis, CEO of the Institute of Fundraising, says Lord Hodgson’s recommendation seems totally inconsistent with the tone of the rest of Hodgson’s report, which emphasises the importance of the sector’s voluntary ethos.

The charity sector is diverse and evolving. Alex Massey, policy officer at Acevo says not that very long ago most chariites did not have paid staff: “Now a fifth do,” he said. “We are a diverse sector.”