Sam Younger, Chief Executive of the Charity Commission, reflects on trustees’ duty to protect their charities’ reputations.
First published in Governance magazine July 2013, by Civil Society Media Ltd
The Commission often reminds trustees of their duty to protect their charity’s reputation. Our guidance on reporting serious incidents, for example, cites damage to reputation as an example of an incident that trustees should make a considered response to and should let us know about.
But reputation is a slippery concept. Unlike tangible assets, reputation – or the loss of it – cannot be objectively measured or compared. Nor does an organisation’s reputation necessarily reflect the quality of its governance or its work. A charity that supports a popular cause or attracts glamorous patrons may enjoy a reputation not merited by its impact or achievements. Conversely, well run and effective charities may suffer reputational losses simply because they advocate causes that divide opinion.
So why and how can an evidence-based regulator assess whether trustees’ decisions have damaged their charity’s reputation? The truthful answer is that we can’t and don’t. As charity law regulator, it is not for us to judge whether trustees have made the right decision for their charity. Only trustees can make that call. This is a legal point – charity law is clear that trustees run charities, not the Commission. And it is also a practical point, in that trustees will have a far richer understanding of the circumstances their charity operates in than us.
Charity law does however, set out how trustees should approach making decisions. And it is the decision making process that we as regulator will examine if a concern is raised with us about a charity. This applies whether the concerns revolve around the reputational or financial implications of the charity’s decision.
Good decision making in charities boils down to four main factors:
Legal powers – making sure you have the power to take your charity in a certain direction.
Information - making sure you have the right information and enough information, including good expert advice where relevant and evidence of the long term implications of the decision; also weighing up the information to make sure your decision is based only on considerations that are relevant to the charity.
Motivation - making sure you are motivated only by the charity’s best interests, not the interests of any other organisation or individual.
Reasonableness – satisfying yourself that your decision is within the range of decisions that a reasonable trustee body might have made in the circumstances.
Questions about charities’ reputation often revolve around allegations that the trustees were improperly motivated and made a decision for the wrong reasons, taking into account factors other than the charity’s best interests. Sometimes the concern is that the decision was ‘really about’ benefiting individuals connected to the charity, sometimes we receive complaints that a charity’s decision was ‘politically motivated’ (see scenario below).
Trustees who were in fact acting in good faith and with the charity’s best interests at heart can respond defensively, even indignantly to such concerns. This is understandable. Trustees are almost always volunteers whose charity responsibilities come on top of a range of other professional and family obligations. They may feel angered if their honour is called unfairly into question.
Our advice is to get your defence in first. Be your own critical friend. Ask yourself how you will explain your decision to beneficiaries, the public, or a journalist. And have that conversation in a board meeting that is properly recorded and minuted. This approach does not equate to being overly cautious or risk averse. You can make controversial decisions. But you have to be able to demonstrate that you took them with your eyes open, alive to the risks and potential implications. It is when trustees have no evidence that they considered the reputational risks associated with their decisions, or asked the ‘reasonableness question’ that we as regulator might have to take action. One way to explain this is to compare it to the approach a maths teacher might take when marking pupils’ homework. She may well pass a pupil who has arrived at the wrong result, but whose ‘workings out’ demonstrate logical thinking. In other words – always keep a record of the ‘workings out’ of your decision making. Of course where the maths analogy breaks down is that there rarely is just one right answer in managing a charity. It is almost always a question of judgement.
These principles do not just apply to trustees’ duties to protect their charity’s reputation. Good decision making is fundamental to trusteeship in all its facets. This is why we have published new guidance designed to help trustees learn how to make good decisions. The primary aim of the guidance is to help trustees comply with the law and avoid serious mistakes. But we also hope that it will promote trustees’ confidence in their own judgment, by making clear that only they can make the ultimate call as to what it is their charity’s best interests.
A housing charity invests in a campaign to raise awareness of the detrimental impact a certain piece of government legislation will have on its beneficiaries. The charity allocates a significant part of its annual income on the campaign.
That campaign attracts a mixed response, including considerable criticism. An influential journalist condemns the charity for what she sees as ‘scaremongering’ and for instumentalising the charity’s vulnerable beneficiaries for political purposes; high profile donors voice concern and ministers make clear that the charity is out of favour.
At the same time, the charity’s stance draws praise in other parts of the press; the charity’s social media following and impact grow; and research prepared for the campaign is cited by leading public figures opposed to the legislation.
Has the charity’s reputation been damaged?
Maybe: by alienating key stakeholders, the campaign may have put at risk the charity’s long-term ability to pursue its objects and to help its beneficiaries. The potential loss of a high profile donor and the negative press response risks a loss of voluntary income for the charity.
Maybe not: the campaign has succeeded in raising the profile of the issue the charity is concerned about and has therefore helped the charity promote its objects. It has also attracted new social media supporters, who may turn into financial supporters of the charity.
This demonstrates that it will almost always be a matter of judgment as to whether the charity’s reputation has been seriously damaged. Situations are rarely clear cut, and factors such as the charity’s previous reputation, its track record and the track record of the trustees as individuals may swing the pendulum either way.
Our role as regulator:
As the charity law regulator, it is not for us to try to make a scientific assessment as to whether the campaign has damaged the charity’s reputation or indeed to judge whether the charity made the right decision in launching the campaign.
We will assess whether the trustees fulfilled their duties in the way they made the decision:
- did they make sure they had the power to make the decision?
- did they make sure the decision was in line with the charity’s objects?
- did they consider the long-term implications of their decision?
- did they take into account all relevant information, including by seeking professional advice?
- did they make sure not to take irrelevant factors into account?
- did they manage any potential conflicts of interest?
- how did they satisfy themselves that the decision was within the range of decisions that a reasonable trustee body could make in the circumstances?
It would be of concern to us if trustees were not able to provide evidence that they considered the issues above. If we were to find that trustees did not comply with charity law in arriving at their decision, we may well decide to get involved. Whenever we do investigate a charity, our aim is always to put a stop to any abuse, ensure the charity’s assets and reputation are protected, and to put the charity back in line with charity law.
If we found the trustee had made the decision following due process, we may not need to investigate further.
However, we would expect the trustees to report the negative publicity to us as a serious incident, and to explain in their report how they are responding to the situation. How are they reassuring their stakeholders and the public as to the rationale for their decision in terms of the charity’s best interests?
If we are satisfied that the trustees do have the situation under control and are taking steps to manage and limit any damage to the charity, we would close our case at this stage.