The new 2020 Edition of the Charity Governance Code has seven key principles. It is aimed at organisations and the Trustee Boards that govern them. Each principle has a general statement, a rationale and key outcomes which are the same for both large and small organisations. There are then lists of recommended practice which differs between large and small charities. Below we summarise the Principle, Rationale and the Key Outcomes for the seven areas and provide a brief commentary on key issues. You can find the recommended practice outlined in Module 7 (7.4 – 7.10).

1. Organisational purpose

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

Rationale
Charities exist to fulfil their charitable purposes. Trustees have a responsibility to understand the environment in which the charity is operating and to lead the charity in fulfilling its purposes as effectively as possible with the resources available. To do otherwise would be failing beneficiaries, funders and supporters.
The board’s core role is a focus on strategy, performance and assurance.

Key outcomes

1.1 The board has a shared understanding of and commitment to the charity’s purposes and can articulate these clearly.
1.2 The board can demonstrate that the charity is effective in achieving its charitable purposes and agreed outcomes.

This principle emphasises the need for trustees to develop long term strategies to move the organisation forward, monitoring progress and budgets and remaining alert to external environmental factors in achieving the organisation’s aims and objectives. It also emphasises the need for trustees to ensure that the organisation remains focused on delivering its purposes and avoids “mission drift”. It also highlights the need to work in partnership with other organisations.

2. Leadership

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

Rationale
Strong and effective leadership helps the charity adopt an appropriate strategy for effectively delivering its aims. It also sets the tone for the charity, including its vision, values and reputation.

Key outcomes

2.1 The board, as a whole, and trustees individually, accept collective responsibility for ensuring that the charity has a clear and relevant set of aims and an appropriate strategy for achieving them.
2.2 The board agrees the charity’s vision, values and reputation and leads by example, requiring anyone representing the charity reflects its values positively.
2.3 The board makes sure that the charity’s values are reflected in all of its work, and that the ethos and culture of the organisation underpin the delivery of all activities.

This covers some of the essential roles and responsibilities of trustees and lays particular stress on the roles relating to legal duties and accepting ultimate responsibility for the way the organisation is run. Even in smaller organisations there is a need for trustees to appreciate the importance of their role and how knowledge of the external environment i.e. what is happening outside their organisation will help them fulfil their legal duties in leading the organisation effectively.

3. Integrity

Principle

The board acts with integrity. It adopts values, applies ethical principles to decisions and creates a welcoming and supportive culture which helps achieve the charity’s purposes. The board is aware of the significance of the public’s confidence and trust in charities. It reflects the charity’s ethics and values in everything it does. Trustees undertake their duties with this in mind.

Rationale
Delivering the charity’s purposes for public benefit should be at the heart of everything the board does. This is true even when a board’s decision might be unpopular. Everyone who comes into contact with a charity should be treated with dignity and respect and feel that they are in a safe and supportive environment. Charity leaders should show the highest level of personal integrity and conduct.

To achieve this, trustees should create a culture that supports the charity’s values, adopt behaviours and policies in line with the values, and set aside any personal interest or loyalties. The board should understand and address any inappropriate power dynamics to avoid damaging the charity’s reputation, public support for its work and delivery of its aims.

Key outcomes

3.1 The board safeguards and promotes the charity’s reputation by living its values and, by extension, promotes public confidence in the wider sector.

3.2 Trustees and those working for or representing the charity are seen to act with honesty, trustworthiness and care, and support its values.

3.3 The board acts in the best interests of the charity’s purposes and its beneficiaries, creating a safe, respectful and welcoming environment for those who come into contact with it.

3.4 The board makes objective decisions about delivering the charity’s purposes. It is not unduly influenced by those who may have special interests or personal interests. This applies whether trustees are elected, nominated or appointed. Collectively, the board is independent in its decision making.

3.5  No one person or group has undue power or influence in the charity. The board recognises how individual or organisational power can affect dealings with others.

This principle has been significantly modified in the latest version. It seeks to emphasise the importance of trustees following high ethical standards. In smaller organisations it is important to remind trustees that they cannot receive any benefit from their charity in return for any service they provide, unless they have express legal authority to do so – from a clause in the charity’s governing document (e.g. constitution) or the Charity Commission or by law.  One issue that has been added is the importance of ensuring that no one person or small group of trustees (or others) has undue influence within the charity, as this can undermine confidence and lead to trustees resigning if they feel that their views are not taken into consideration or they are not listened to. It emphasises the need to create a safe and welcoming environment.

4. Decision making, risk and control

Principle
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.

Rationale
The board is ultimately responsible for the decisions and actions of the charity but it cannot and should not do everything. The board may be required by statute or the charity’s governing document to make certain decisions but, beyond this, it needs to decide which other matters it will make decisions about and which it can and will delegate.

Trustees delegate authority but not ultimate responsibility, so the board needs to implement suitable financial and related controls and reporting arrangements to make sure it oversees these delegated matters. Trustees must also identify and assess risks and opportunities for the organisation and decide how best to deal with them, including assessing whether they are manageable or worth taking.

Key outcomes

4.1 The board is clear that its main focus is on strategy, performance and assurance, rather than operational matters, and reflects this in what it delegates.
4.2 The board has a sound decision-making and monitoring framework which helps the organisation deliver its charitable purposes. It is aware of the range of financial and non-financial risks it needs to monitor and manage.
4.3 The board promotes a culture of sound management of resources but also understands that being over-cautious and risk averse can itself be a risk and hinder innovation.
4.4 Where aspects of the board’s role are delegated to committees, staff, volunteers or contractors, the board keeps responsibility and oversight.

This principle emphasises the importance of having clear systems and procedures in decision-making and carrying out the work of the organisation and having these in writing, so that it is clear how work is delegated. It emphasis the need for board members to regularly review the range and impact of risks the organisation faces and emphasises that the board is ultimately responsible for the decisions made and actions taken.

Smaller organisations may only need a few policies, such as Health and Safety and Equal Opportunities, particularly if they do not employ paid staff. One issue though that needs careful thought is that of delegation. Sometimes in small groups, trustees or management committee members go off and “do their own thing”, making decisions as they go along. It is important that individual board members are clear about what decisions they can and cannot make by themselves.

5. Board effectiveness

Principle

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

Rationale
The board has a key impact on whether a charity thrives. The tone the board sets through its leadership, behaviour, culture and overall performance is critical to the charity’s success. It is important to have a rigorous approach to trustee recruitment, performance and development, and to the board’s conduct. In an effective team, board members feel it is safe to suggest, question and challenge ideas and address, rather than avoid, difficult topics.

Key outcomes

5.1 The board’s culture, behaviours and processes help it to be effective; this includes accepting and resolving challenges or different views.
5.2 All trustees have appropriate skills and knowledge of the charity and can give enough time to be effective in their role.
5.3 The chair enables the board to work as an effective team by developing strong working relationships between members of the board and creates a culture where differences are aired and resolved.
5.4 The board takes decisions collectively and confidently. Once decisions are made, the board unites behind them and accepts them as binding.

This principle concentrates on the quality of an organisation’s trustees and the need for the Board to meet often enough to ensure that the business of the organisation is carried out efficiently. It looks at the effectiveness of the group’s governance and management structure and performance.

With some small groups the Board of Trustees / management committee may have had the same personnel for many years. This can sometimes lead to a lack of freshness and new ideas and results in groups losing touch with its members or what is happening “in the outside world”.

6. Equality, Diversity and Inclusion

Principle
The board has a clear, agreed and effective approach to supporting equality, diversity and inclusion throughout the organisation and in its own practice. This approach supports good governance and the delivery of the organisation’s charitable purposes.

All trustees have the same responsibility for the charity, so they must have equal opportunity to contribute to decision making. Board diversity, in the widest sense, is important because it creates more balanced decision making. Where appropriate, this includes and centres the communities and people the charity serves. This increases the charity’s legitimacy and impact. Equality and diversity are only effective and sustainable if the board works to be inclusive, ensuring that all trustees are welcomed, valued and are able to contribute.

Board that commit to equality, diversity and inclusion are more likely to set a positive example and tone for the charity by following an appropriate strategy for delivering its purpose and setting inclusive values and culture.

Key outcomes

6.1 The principles of equality, diversity and inclusion are embedded in the organisation and help to deliver the charity’s public benefit.

6.2 Obstacles to participation are reduced, with the organisation’s work designed and open for everyone included within its charitable purposes. This supports the charity to challenge inequality and achieve improved equality of outcomes.

6.3 The board is more effective because it reflects different perspectives, experience and skills, including, where applicable, from current and future beneficiaries.

This area has been significantly expanded in the 2020 version of the Governance Code. It emphasises the importance of equality of outcomes and the need to welcome different perspectives and experiences.

7. Openness and accountability

Principle
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.

Rationale
The public’s trust that a charity is delivering public benefit is fundamental to its reputation and success, and by extension, the success of the wider sector. Making accountability real, through genuine and open two-way communication that celebrates successes and demonstrates willingness to learn from mistakes, helps to build this trust and confidence and earn legitimacy.

Key outcomes

7.1 The organisation’s work and impact are appreciated by all its stakeholders.
7.2 The board ensures that the charity’s performance and interaction with its stakeholders are guided by the values, ethics and culture put in place by the board. Trustees make sure that the charity collaborates with stakeholders to promote ethical conduct.
7.3 The charity takes seriously its responsibility for building public trust and confidence in its work.
7.4 The charity is seen to have legitimacy in representing its beneficiaries and stakeholders.

The final principle looks at the importance of good communication between trustee boards and their organisations’ members or users. It promotes the importance of an open process of communication.

In Module 7 Good Governance we look in more detail at the Code, its content and its practical applications.

The National Occupational Standards for Trustees and Management Committee Members in the Voluntary and Community Sector

The National Occupational Standards for Trustees and Management Committee Members, known as the Trustee Standards (TS) have been developed in order to encourage good governance throughout the voluntary and community sector. The TS were approved by the Qualifications and Curriculum Authority (QCA) in January 2006.

While the TS refer to ‘Trustees’, they are relevant to all those who have a strategic or governance role in a voluntary or community organisation. As specific titles and roles vary between organisations, you may be more familiar with the following ways of describing trustees:

1. Management Committee Member
2. Board Member
3. Director
4. Council Member
5. Governor.

The TS have been designed for Trustees in all sizes of organisation, from small community based groups, to large UK-wide charities. They represent a standard of best practice for the role of governance for Trustees, describing the knowledge and skills you need in order to perform to the required standard.

Occupational Standards are statements of competence, which describe the outcomes required for an individual to achieve good practice in particular areas of activity. They exist for many different occupations. They are often used as a foundation on which National Vocational Qualifications (NVQs) are developed. The National Occupational Standards for Trustees can be used to plan, structure and review training and learning for trustees.

The TS consist of four units that are designed to help trustees understand what is involved in being a trustee and to enable them to carry out their responsibilities with confidence. Whether you are currently serving as a trustee, or are considering becoming one, it is very important that you are clear about what is entailed in your role as a trustee.

The units cover the legal requirements for good governance, but also outline what good professional practice suggests in a wide range of other areas, such as equal opportunities, recruitment and learning and development. The units cover the basic outline of an organisation (what the organisation is there to do), the responsibilities involved in running an organisation (what trustees need to do), the requirements on the management committee or Board of the organisation (how to function effectively), and the role and make-up of the management committee or Board (how it is organised).

The TS are by no means compulsory, nor do they represent a legal framework, but are intended as a source of guidance to help trustees be effective in their role. Some areas in the standards may not yet be applicable to you, if your organisation is only very small. However they will provide guidance on areas that, as your organisation grows, you as a trustee should be thinking about.

Trustees can use these standards to check, over time, that they are carrying out their role effectively and to identify any knowledge that trustees need to acquire or skills they need to develop. Equally, organisations can use the Trustee Standards to ensure that their trustees are competent and have the necessary knowledge and skills to serve the organisation well.

To view an outline of the Trustee Standards, see below.

The Trustee Standards (summary)

In Module 4 Roles and Responsibilities we look in more detail at the Trustee Standards, their content and their practical application.

The Hallmarks of an Effective Charity

The Hallmarks of an Effective Charity were developed by the Charity Commission to set out standards that would help trustees to improve the effectiveness of charities. The standards are divided into six “Hallmarks” or principles. For each of these, the Charity Commission has listed a number of ways in which the Hallmarks might be demonstrated, but not every example will apply to every charity. Whilst a few of these are legal requirements (marked in the publication with an L), most are matters of good practice.

PLEASE NOTE: The Charity Commission has in the last couple of years abandoned its promotion of the Hallmarks, given the revised Charity Governance Code and other quality systems related to trustee boards. However, the principles behind the Hallmarks are still a useful indicator of good governance.

Although these Hallmarks are relevant for all charities, the way in which they can be demonstrated or achieved will vary depending on the size, income, complexity and activities of each charity, although some charities may find different routes to the same end. Experience shows that, whatever its size and activities, trustees can use these Hallmarks as a means of reviewing how their charity is performing and to identify the areas in which the charity is strong and those areas which need further development.

To view detailed information and guidance on the six Hallmarks, see below (taken from the Charity Commission’s CC10 Booklet).

(Where the letter “ L ” appears, this is a legal requirement).