Charity Governance Code, But What Is Good Governance & How Can We Do It Well?

This article provides a definition of good charity governance, outlines how the Charity Commission wants the Charity Governance Code to be used and gives you some key questions to test the effectiveness of your board's governance. Assess how good your charity's governance is, online in 30 mins, using the free Charity Excellence Framework.

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What is Governance?

Whilst we all recognise the importance of governance in ensuring that a non-profit is successful, it’s easier said than defined. Here’s the definition I prefer:

The Board’s responsibilities in setting the strategic direction and culture of the organisation and ensuring it is well led and managed, to achieve its charitable objectives.

What are Governance Codes?

The Charity Governance Code is a practical tool that sets the principles and recommended practice. One version is for larger charities, with income in excess of £1m pa and the 2nd for smaller charities. 

Equally, there are other governance codes that may be applicable to certain charities, such as those working in sport and, if you’re involved with the Public Sector, you may also hear about the 7 Nolan Principles. 

Each code is different, but based on similar foundations along the lines of selflessness, leadership, effectiveness, integrity, openness and accountability.   

How Do We Use the Code?

The Charity Code is applicable to all charities, but is deliberately aspirational.  It has been endorsed by the Charity Commission, but is neither a legal nor regulatory obligation. Consequently, trustees should make use of the code, by using the ‘apply or explain’ approach recommended in the code. That is, to either:

·        Apply each area of the code, or;

·        Be able to explain what is being done instead to meet the principle, or;

·        Why it is not applicable.

Perhaps the greatest value in the Code is not the extent to which any organisation complies with it, but rather in following a robust, objective process in assessing how best to meet the principles below.

What should I watch out for?

The 7 principles in the Charity Governance Code principles are outlined below. However, make sure that any assessment of these is not simply a 'tick-box' exercise. Organisational values, terms of reference, and policies and procedures provide essential clarity and structure, but it's what an organisation actually does, not what it says, that makes a difference. Far too many charities do the paperwork and talk, but don't act.

Ask yourself, to what extent can I see our board and senior team individually and collectively, behaving in a way that consistently meets each of the principles below?

1. Purpose 

The Board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably.

·        What processes are in place to review and exercise oversight of the above and how do you know these are these effective?

·        Do you have objective analysis and data that confirms this? If you're doing the same thing in the same way you always have, probably not. The world has changed, we need to as well.

2. Leadership

Every charity is headed by an effective board that provides strategic leadership, in line with the charity’s aims and values.

·        Does the Board lead on strategy, ask the difficult questions, act decisively and always in the charity's best interests?

·        If your board focusses on operational detail, rubber stamps decisions and there are personal agendas being pursued, probably not.

3. Integrity

The Board acts with integrity, adopting values and creating a culture which helps achieve the organisation’s charitable purposes. The Board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly.

·        Does the Board live its own values, is it open to and seen to respond constructively to criticism?

·        Does it both positively challenge and support the staff team?

4. Decision Making, Risk & Control

The Board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment, and management systems are set up and monitored.

·        Does the Board have processes to ensure that all key issues are debated adequately?

·        Are there effective oversight systems for the whole organisation, and are these demonstrably working?

5. Board Effectiveness

The Board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions.

·        Does the Board have the capacity and skills it needs and does it act collectively?

·        If you don't have the people you need, you might like to read How to recruit great trustees.

6. Diversity

The board’s approach to diversity supports its effectiveness, leadership and decision making.

·        We're all committed to diversity, but far too many charity boards are not. At your next Board meeting have a look round the table. Are at least 30% women and does the Board reflect the diversity of the community you work with?

·        You can find some ideas on how to improve diversity here.

7. Openness & Accountability

The Board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.

·        To what extent does input from your stakeholders actually impact Board decisions?

·        What processes do you have to engage with them, how do you know these are effective and is their input demonstrably reflected in the Board's decisions?

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