UK: The Death Of Charity

Last Updated: 13 August 2013
Article by Stuart Thomson

If anyone was under any doubt that charities face just as much scrutiny as any private sector company, politician or celeb then the 'outcry' over executive pay will have put them right.

William Shawcross, Chairman of the Charity Commission, made comments questioning the pay of some charity chief executives, suggesting that the issue could do damage to their reputations.

Whilst he started off rightly pointing out that it is an issue for the trustees of the charity, not for the Commission, to decide on, he asked whether such pay was fair on donors and taxpayers.  'Disproportionate salaries risk bringing organisations and the wider charitable world into disrepute', he noted.

However, comments such as these by someone as influential and important in the sector as Shawcross have a habit of stirring up trouble and inflicting reputational damage.

By making the comments in the first place, Shawcross helped to give weight to an investigation by the Daily Telegraph.  Add in comments from Priti Patel MP, one of the stars of the Conservative Party, and the sector then faces a new problem.

Government itself, then too, has to become involved. Justine Greening, Secretary of State for the International Development called for more transparency from charities, and for charities to open themselves up as Government has done.  She said that 'In Government we have opened up the books to improve efficiency and we believe that open data can improve delivery and give people more choice on services.'

The nuances of the arguments are being lost.  The charities are often big businesses, complex organisations, with large amounts of employees and, in effect, operations and responsibilities across the globe.  The comments, whilst concentrating on those involved in international development, are impacting on all charities.

The selective use of statistics to 'prove' a political point could have far-reaching consequences.  The fact that a trawl of charity annual reports which are publically available already provides details of pay, bonuses, income and how the money is used seems not mentioned.  Quite what Justine Greening has in mind in terms of more open data is not clear.

For charities, not just those directly in the firing line from the latest media reports, the damage could be significant.  Reputation is all important.

Fundraising – Stephen Bubb of ACEVO did not believe that high salaries put off donors, saying that 'this simply isn't an issue for donors'.  Consistent attacks by Government and the media could make it one.  It remains the case, however, that a prospective donor can look at a charity's accounts to see how its top executives are paid.

Regulatory intervention – whilst the Charity Commission has said it is an issue for trustees they could seek to consider new guidance or pick up on the Government's comments about information provision.

Central government intervention – as Government looks for new targets (see one of my earlier blogs) the charity sector could well be considered for 'reform'.

Media – if they believe that there is an issue to look at then the investigations will continue and all charities have to prepare for that.  The focus may shift over time onto other areas of spending but if they believe there is a story then the scrutiny will be relentless.

Contracts – many charities operate services and have contracts in place with central and local government, as well as other bodies.  These relationships can come under strain and private sector partners too may become worried about the fallout for them in being involved with charities whose reputation is questioned.

It would also not be surprising for the one of the Parliamentary Select Committees to open an inquiry into this issue.  There may be a dispute as to who 'owns' the issue though, with International Development and Public Administration being two likely contenders.  Select Committees tend to have inquiries into issues that have a high profile and if they do then it keeps the whole thing bubbling away for even longer.

Even those charities not directly implicated this time around need to be thinking about the consequences of the comments and considering the implications for their organisations.  The question of executive pay is, though, one for the charity trustees.  They just need to be prepared to justify their decisions on this question, as for any other.

Reputations have to be planned and built and measures put in place to protect them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Stuart Thomson
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