Jo Coleman, partner and head of charity and not for profits at IBB Solicitors, looks at the recent ICSA Guidance for the corporate world and finds that its lessons are just as relevant for charity trustees.

There is a difficult balance to be struck for anyone engaged in training or advising trustee boards between making sure that they clearly understand their duties and responsibilities (for the general control and management of the administration of the charities they serve) and making sure that you don’t scare the horses. Trustees give up a significant amount of their free time to serve as charity trustees and it can often be difficult for them to find additional time to attend the many excellent training courses and conferences that are now readily available in the sector.

The Charity Commission’s guidance is a good starting point for any new trustee but the Commission’s ‘one size fits all’ approach and general tone of voice does not suit everyone. As a sector, we need a variety of different tools and guides to get the message across to the hundreds of thousands of trustees who serve the sector and may respond to different styles. Which is why I always pick up any new guidance with interest in the hope that I can file it away, and use it in the right situation.

In January 2013, the Institute of Chartered Secretaries and Administrators (ICSA) published guidance on liability of non-executive directors: care, skill and diligence. It is a short four-page note which is designed to help non-executive edirectors (NEDs) think about the steps they might take not only to ensure that they are effective in their role but also to ensure that they are not exposing themselves to liability. In essence, the guide is focused on ensuring that NEDs can defend themselves effectively against any future allegations of wrongdoing. In any discussion about the role of trustees and their duties, it is often the question of personal liability that most engages the audience. So, it may be that this new guidance (with the right health warnings) could be of real value to trustee boards – especially those that comprise trustees drawn from the corporate world.

The guidance is based on the UK Corporate Governance Code and the FRC Guidance on Board Effectiveness, and as such is not all relevant, but it does make some really useful points which are just as pertinent for charity trustees. Expressed in the language of UK PLC, it may also be more accessible to some trustees.

The guidance splits its recommended practice into two areas – what to do before a NED joins a Board and what to do following appointment. There is no game-changing solution or magic bullet but it does offer some sensible and common sense recommendations to help limit possible future liability.

BEFORE:

DUE DILIGENCE – undertaking sufficient due diligence about the organisation before joining the board to ensure that it is an organisation in which they can have confidence and to which they can make a strong and value-added contribution.

DUTY OF CARE – understand that a director’s duty is to exercise the care, skill and experience that may be expected from a reasonably diligent person, but be clear that a higher standard is expected from a director with a specific skill or experience.

CULTURE AND VALUES – take time to understand the culture, values and behaviours of the organisation.

CONFLICTS OF INTEREST – understand the rules on conflicts of interest. Of course in the case of charities, we also need to add the prohibition on trustee benefits.

The guidance for NEDs suggest that they spend time reviewing their letter of appointment making sure it sets out the minimum time commitment expected and the possibility of additional time commitments. Many charities now have a trustee role description which sets out what is expected from trustees but maybe now is the time to take that a stage further and consider asking charity trustees to sign a document similar to a letter of appointment (which is careful not to create any employment relationship) but which sets out very clearly both parties expectations. Charity trustees should be warned at the outset (just as NEDs should) of the need to be available to meet the needs of the charity at times of significant challenge or crisis.

ONCE APPOINTED:

UNDERSTANDING THEIR ROLE – which is to provide independence, oversight and constructive challenge to the board, in contrast to the senior leadership team, whose role is to manage the business.

INDUCTION – receive a comprehensive induction-programme into which they should have input and take responsibility themselves for their on-going training and continuous development – including keeping abreast of developments within the sector and the legal regulatory and governance environment. Whilst many charities are good at introducing new trustees to the work of the charity, the legal and regulatory duties are often given less focus.

SCHEDULE OF MEETINGS – planned well in advance and notified to all in good time.

PROVISION OF INFORMATION – which should be high quality information provided sufficiently in advance of meetings and should be accurate, clear, comprehensive, up to date and timely.

ACCESS TO THE EXECUTIVE TEAM – to raise any concerns that they may have and also to appoint independent professional advice if necessary.

OBJECTIVE DECISION MAKING – in the best interests of the organisation.

CONSIDER THEIR POSITION – appreciate that circumstances may arise when they should consider resigning.

Whilst there is an additional charity perspective that will need to be explained to charity trustees, charity trustees wishing to know how best to avoid personal liability going forward, will be heading in the right direction if they have read and taken on board this new guidance for NEDs. As such it would be five minutes well spent for charity trustees and senior directors, particularly those with boards drawn from the corporate world.