Charitable Companies: Putting the “Good” in Good Governance

It is essential that charitable companies understand what is required from a governance perspective. Governance is not a tick box exercise but rather an elephant in the board room at all times, and one to which close attention should be paid.

The duties of directors of charitable companies (also referred to as “trustees” or “board members”) can be difficult to digest. Directors of charitable companies must turn their attention to the two hats they wear under two aspects of law. They must comply with their duties under the Charities (Northern Ireland) Act 2008 and also under the Companies Act 2006. However over and above complying with codified duties, trustees must really understand and apply good governance practices. Merely paying lip service to these practices will not cut the mustard and what is more, good governance can serve to avert the dreaded fate of a “bad headline”, a fate which so many charities have succumbed to in the recent past.

But where do charitable trustees start in this minefield? A good place to begin is with “The Seven Principles of Public Life” which were defined by the Committee for Standards in Public Life and apply equally to charitable trustees as they do to holders of public office. In brief, the principles are as follows:

• Selflessness: directors of charitable companies should act solely in terms of the public interest. They should not do so in order to gain financial or other benefits for themselves, their family or their friends.
• Integrity: directors of charitable companies should not place themselves under any financial or other obligation to outside individuals or organisations that might seek to influence them in the performance of their official duties.
• Objectivity: in carrying out public business, including making public appointments, awarding contracts, or recommending individuals for rewards and benefits, directors of charitable companies should make choices on merit.
• Accountability: directors of charitable companies are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.
• Openness: directors of charitable companies should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands it.
• Honesty: directors of charitable companies have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.
• Leadership: directors of charitable companies should promote and support these principles by leadership and example.

At first glance the above might look like a lot of detail, but starting quite literally from these as first principles and keeping them in mind when making decisions in relation to your charitable company will not steer you wrong.

If you would like any further information or advice, please do not hesitate to contact Rosie Timoney or one of the other members of the Charities team at Carson McDowell.