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Should charities pay their trustees?
In his recent Charities Act review report, Lord Hodgson recommended that charity trustees are paid. Paul Marvell looks at the pros and cons of this recommendation and makes the case for having more fundraisers on boards of trustees.
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One of Lord Hodgson's recent recommendations is that trustees in voluntary organisations with a turnover of more than £1m should be allowed to pay their trustee board without seeking permission from the Charity Commission.
On a long and stop-start journey to Bristol I started musing over the pros and cons of doing this and what it might achieve. It has to be said that I could not think of too many pros, so this blog may not appear perfectly balanced, but isn't that the purpose of blogs?
I do speak with some experience having worked closely with boards for many years now, but also having been a trustee at a small international NGO called ChildHope for the past two years.
So what are the possible positives about paying your trustees? Well, some might argue that it would make it easier to attract skills that are otherwise harder to recruit volunteers into. Any help identifying these gaps welcome!
Secondly it could perhaps encourage greater professionalism on the part of trustees. Perhaps if they were being paid they would feel a greater sense of obligation?
Thirdly it could possibly make performance management of trustees more straightforward, perhaps by making them more accountable.
Finally it could help attract those who simply cannot afford to volunteer, e.g. unemployed people (but wouldn't pay affect their benefits?).
I think these are fairly weak arguments are more than outweighed by the case against. I would argue that volunteering at all levels is at the very heart of the ethos of our sector. Why should trustees be treated differently to any other volunteers? How could charities afford to pay volunteers in any case, beyond the normal payment of expenses, which many volunteers don't bother to claim anyway?
I would also argue that trustees are not motivated by pay. There are a variety of well documented motivations for volunteering: wanting to do something for a good cause; wanting to put something back; a passion for the cause for many reasons including maybe a deeply personal connection; maybe they were a founder of the charity; for career development reasons, networking, and many other reasons. I doubt if payment has ever entered their heads.
Then there are issues with public accountability and credibility. It is hard enough to explain to many people why charities should even pay their staff, let alone extend payment to volunteers! Shouldn't charities be looking to generate income rather than spend it?
I would also make the point that boards are there to ensure good governance of the organisation, to provide and demonstrate leadership, to support and advise the staff team, to give strategic direction. In my opinion they are also there to ‘give and to get’ - by that I mean that rather than taking a pay packet from the cause they should be supporting it financially, preferably by giving their own money within their means, and/ or at the very least fundraising for the charity, or enabling fundraising through others.
In any case do charities really need to pay to attract quality trustees? Absolutely not! There is a wealth of talent out there, and I would suggest that if charities are not able to attract this talent they are looking in the wrong places.
I have been advocating trusteeship to IoF members for the past three years. If we can get fundraising talent on boards it solves two problems - firstly lack of understanding of fundraising on many boards and secondly support amongst the board for the staff team doing the fundraising. Also it is a great way for fundraisers to develop their own skills, experience and knowledge of governance which can only be good for them, their career and the sector.
So please Lord Hodgson, reconsider this suggestion. What works in the commercial sector can often be applied to the not-for-profit sector, but not in this instance.
About Paul Marvell
Paul Marvell is Director of Professional Development and Membership at the Institute of Fundraising. He is responsible for driving forward the professionalism and effectiveness of fundraising through the Institute’s range of learning opportunities, including qualifications, courses, online learning, CPD and conferences. More about Paul.
Comments
Derek Campbell | 31 July 2012
The suggestion that trustees of some, larger charities could be paid without first seeking the permission of the Charity Commission is bound to raise some concern; Marvell’s response I suspect will be typical. The reasons for payment will be styled as weak and the reasons for not paying for trustees will be seen as overwhelming, case closed.
I suspect that for many the idea of paying any staff in a charity is something of an anathema, and for sure volunteering is very strong in the ethos of third sector organisations. However, there are other resources that no one expects charities to get for nothing, like electricity or phone calls. The case for why human resources should be free whilst other resources are paid for doesn’t appear to be made. Now this may be easy to defend for professional staff in a large charity. In Scouting, many of the people at HQ are paid professionals, no (or few) objections with that. Hodgson recognises that the skills, experience and qualifications of professionals may be necessary for some charities. But are trustees a different case altogether?
It seems to me that if there is a requirement for skills, experience and qualifications in trustees and these attributes can be evaluated in the market place, it would not be unreasonable for a charity to offer the trustee a compensation package that recognises the value of the talent that trustee brings. Whether the trustee accepts all or any of the package is, of course, a different matter. In a similar way, if an air ambulance operation requires an new helicopter, the technical specifications of appropriate machines will come with a price. If the supplier decides to discount or gift the machine is, likewise, a different matter.
So if the cost of inputs to a charity are potentially the same as for any other commercial organisation, does this rob a third sector organisation of something essential? Put another way what is the difference between a business and a charity if it is not volunteers? Well two aspects spring to mind. The first is how the charity allocates resources that is different to a business, particularly in respect to its customers/clients/consumers. A business typically allocates resources on the basis of ability to pay. In fact this is pretty much a universal feature of a commercial enterprise, even if discounts are offered to groups such as the young or the old etc. Children’s ticket prices in the theatre are lower, for example. But these concessions do not escape the maxim that price determines the allocation of goods and services. Charities typically do not use price as the determinant in allocating resources; need is the more usual criterion. How that need is assessed may vary from charity to charity, but the ability to pay is less relevant than for businesses. And the second distinguishing feature of charities when compared to businesses is working out what the purposes of the organisations are. A firm typically aims to create surpluses (profit) from their activities which are distributed to the shareholders. Charities seek to provide public benefits from their activities. For some charities this could be to generate surpluses (profit) from activities which are distributed to the needy.
At this point it becomes clear that volunteers are hugely helpful in generating surpluses, since labour for most organisations is a significant, if not the biggest, cost. Indeed it can be seen that commercial organisations would (probably) welcome volunteer labour, all other things being equal, as it would increase profits for them too. Where commercial organisations may differ in outlook when compared to third sector organisations is that costs are passed on in pricing for commercial outfits, so products and services contain all of the costs of production (generally). For charities, supplying on the basis of need rather than the ability to pay, it is necessary to recognise that since the consumer isn’t paying, then keeping the costs down, by removing the cost of labour achieved by using volunteers, is an important tactic.The fact that this has gone on for so long and has been adopted almost universally may lead people to suppose that volunteering is essential to charities. I think that allocating products and services on a basis other than price and distributing surpluses to the needy are the two essential features of charities. Volunteers contribute greatly to these objects but are not strictly essential.
So paid trustees, it can be seen, are perfectly consistent, in my view, with the essential characteristics of a charity/third sector organisation. Trustees are a necessary resource of a charity organisation and it should not be an expectation that these resources can be provided for free. The fact that many people are prepared to be trustees for no financial reward is to be both applauded and encouraged. It increases the surpluses available to the organisation to be reinvested or distributed to the needy. Furthermore, a bigger charity organisation that has particular requirements in terms of skills, experience and qualifications will potentially be fishing in the same pool as large commercial organisations looking for executive and non executive directors. It would certainly seem appropriate that the rules governing remuneration of directors and non executive directors should apply in the third sector. Certainly for non executive directors a fee, rather than a salary, that reflects the time and responsibilities of the role is appropriate and again, this appears to be a useful starting point for trustees. Whether or the extent to which executive managers or directors of a charity should also be trustees is another issue altogether and raises the concern of a conflict of interest.
In conclusion, there appears to be no logical reason why trustees should not be compensated for their time and responsibility working for a charity. Many, I suspect would decline, return or donate most or even all of their fee. For those who don’t, it should not be an issue, the fee is legitimate. There need to be safeguards in place to ensure that a conflict of interest does not arise, and whether charity trustees can also be charity executives (I’m thinking of the same charity, but this may require further reflection) is less clear cut.
Ian Clark | 22 August 2012
Derek argues his case for some paid trustees fairly well, but has failed to convince me. I've been an unpaid trustee of several national charities as well as small local ones. And I am currently trustee of a very large group of pension funds, which is essentially the same type of governance role.
There is already provision for many charities to pay trustees who are qualified for their services (eg for writing technical guides) providing they are not "governing".
Governance is a collective process, bringing together different independent people from various backgrounds and experience to take a rounded view of the best interests of the charity and its beneficiaries. This is difficult is some trustees are paid for governance, and others not. Paying trustees would also blur the clear line between them and paid staff. For this reason I would never advocate making senior paid staff trustees, even although I would welcome them into most trustee meetings as speaking observers (non-voting).
Like Paul, I hope the government turns down this Hodgson proposal, and still makes all charities apply to the Charity Commission with a well-argued case, if they want to pay their trustees.