Understanding the role of the charity trustee
People often take on the role of a charity trustee as one of a number of non-executive roles they undertake when building a broadly based portfolio career, or perhaps as an initial step to gain board experience before they seek what they imagine may be less forgiving roles in other fields.
The similarities between the roles of trustees and non-executive directors
There is of course much to be learnt from carrying out a charity or not-for-profit role, particularly by those who have not served on a board before: the interactions between those seeking to work together as a board to achieve some common purpose, while at the same time providing challenge to the executive and assuming responsibilities for the development of longer-term strategy and oversight over the day-to-day management of the organisation, are likely to have some similarities in all organisations of roughly equivalent size. And within the charity sector, comprising probably between three and four hundred thousand registered and smaller unregistered organisations in England and Wales, there are many organisations whose operations often overlap with those of a purely commercial organisation in a number of important ways.
Three key differences between the roles of a commercial non-executive and a charity trustee
But some of the formal differences between charities and commercial organisations should also be borne in mind:
charities of any size have no shareholders seeking a financial return on their investment whose interests a board must always seek to serve. Not only does this create a different purpose for the existence of a charity from that of a commercial organisation, but also changes the ways in which a charity may seek to finance itself (although these may include commercial activity), and puts an even greater emphasis on the importance for a charity of taking other stakeholder interests into account. Stakeholder interests will always include the interests of beneficiaries, and also in different ways those who provide finance, whether as bankers, donors or grant givers, employees and those who provide services and perhaps goods for the charity, whether as volunteers or in a commercial capacity, and the interests of the wider public as a whole. In order for an organisation to exist as a charity and obtain the tax benefits which flow from having charitable status, it must not only have a specific “charitable purpose” falling within the categories of such purposes listed in statute, it must in fulfilling that purpose meet the “public benefit requirement” – of which some more below. Consider also the reputational damage which a charity may always suffer through not behaving as a responsible citizen.
with some exceptions, particularly in larger charities, trustees will not be personally remunerated, and this legal rule on trustee pay is such that executives will not themselves be members of a charity board. Consequently, the relationship between a chief executive and a chair and/or the board as a whole is likely to have even greater significance and require even more careful handling than in a commercial company.
the fact that members of a charity board are unpaid “volunteers” as just described means that they will not all have had the experience, directly or even directly, of running an organisation such as may be expected of most of those becoming directors on a commercial board for the first time. Many will have joined a charity board because of their interest or experience in the objects of the charity, and not (simply) because of their professional competencies.
Joining a charity board and understanding the charity trustee role
For someone joining a charity board for the first time, as a step in a career which may not be exclusively dedicated to the work of the particular charity or others operating in similar fields, the mixed composition of trustee boards (often including those with little organisational experience or professional insights into board effectiveness) may be key to finding an answer to the question “what can I contribute as a trustee?”.
Certainly, a charity board may offer opportunities for learning new skills and gaining a new and broader outlook – as I have tried to sketch out in part 1 of this article – but it may also call for the inputting of special skills as well.
Charity boards are likely to comprise people of diverse skills and interests and from diverse backgrounds; accordingly it is likely to be unreasonable to expect every board to operate with smooth efficiency and effectiveness at all times, and almost certainly effectiveness will be more difficult to achieve than on a commercial board comprised entirely of paid professionals.
What the new trustee on a charity board can expect to add however, on top of the trustee’s existing skills and expertise (whether in finance, IT, HR or otherwise) is insights into the way a board should work and the ways in which the organisation’s activities might be better handled or managed – drawing on the new trustee’s previous experience in the running of other organisations. Having a good and helpful chair will help, and the new trustee should make it their business to assist their chair, as well as other trustees, in making their role fulfilling and worthwhile.
Running effective charity boards
One of the key points in the effective running of a charity board will be maintaining the charity’s focus on the fulfilment of its charitable purposes, with proper regard for the “public benefit requirement” referred to above. It will help any trustee to have a genuine “passion” for the purposes for which their trustee is established; and it should be borne in mind also that pursuit of the charity’s purposes may require a much more disciplined approach to the development of strategy than may be appropriate in a commercial organisation. For charities, there is much less flexibility than in a commercial organisation to pursue objects incidental to its stated aim or purpose or to alter course if the organisation feels constrained for any reason by its existing objects: changing a charity’s purpose is a formal process and may be complicated, requiring Charity Commission consent.
Helpful resources for recently appointed charity board trustees
The Charity Commission publishes a wealth of guidance around the subject of charitable purposes and the public benefit requirement: see the webpage for an introduction to this.
Trustees need to bear in mind particularly the annual reporting requirement on this, as explained in the Charity Commission at this link.
All may be easier if the trustees have followed the initial Principle and related guidance in the Charity Governance Code stating that the board should be “clear about the charity’s aims and ensures that these are being delivered effectively and sustainably”: see the Charity Governance Code website.