Dorothy Dalton considers the implications of NCVO's executive pay inquiry for trustee boards.

I write this editorial after the recent NCVO report on senior executive remuneration was published.

In November 2011, I forecast that media and hence public interest in senior executive remuneration packages, severance payments etc was likely to increase significantly. I ended my editorial by writing: “Boards have to be prepared to justify their remuneration decisions and if ever salaries at the top are questioned by supporters or the media, the chair of trustees, not the chief executive, should field all questions about salary levels, severance pay etc and should be able to justify the board’s decisions on remuneration.”

As boards we should regularly review our performance management policy, remuneration policy and terms of reference of the remuneration committee (if such a committee exists). There are however other issues that boards need to consider. For instance, the report recommends the use of remuneration ratios ie the ratio of the highest-paid to the median pay in the organisation. How does the board set the ratio and how does it reduce or increase it over time?

If specific details of remuneration packages of senior executives are to be published, chief executives will need to manage the potential problems that may arise when their senior colleagues discover what each other are paid.

Should the charity provide an occupational health service to support its workforce?

If some workers are on the minimum wage, should the charity, for moral and ethical reasons, not consider putting them on a living wage instead? The answer to this question can be less straightforward than one expects. Will those on slightly more not want the differential to remain to reflect their greater skills? What will be the final increase to the charity’s wage bill? Will this increase mean fewer beneficiaries being helped?

Zero-hours contracts are often used by charities to mitigate some of the financial risks relating to public service delivery contracts or fluctuating demands on the charity’s services. Can zero-hours contracts be applied so that they are fair to both employee and employer? How will the charity handle stakeholder criticism of such contracts?

Finally, have boards ensured that any employment appeal system has a genuinely independent person(s) to hear a final appeal?