The Charity Commission code of governance
A brief summary
The Charity Commission have developed the code of governance as a tool for boards to assess and develop their effectiveness. It is regularly consulted on and updated.
The code is structured as a house. The trustee role is the foundation; the organizational purpose the roof sheltering all the rooms and then there are 6 “rooms”.
The code identifies a principle, a rationale, a set of outcomes and some suggestions for good practice for each element.
The code does not prescribe how each charity should achieve the outcomes under each element and it has set deliberately stretching targets. It is in that sense a developmental tool for best practice rather than a checklist for compliance.
The full detail is set out on the code of governance website
This summary aims simply to offer an introduction and over view.
The Foundation – the trustee role
The code’s starting point is that every trustee is
- Understands their legal obligations and responsibilities
- Wants to improve their charity and its governance
The roof – organizational purpose
The board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably.
The emphasis in this section is on the board’s role in setting strategy and in monitoring performance. There is a clear distinction between strategy and operations.
The board should be assessing the extent to which it
- has a shared understanding of and commitment to the charity’s purposes and can articulate these clearly.
- can demonstrate that the charity is effective in achieving its charitable purposes and agreed outcomes.
Room 1 Leadership
Every charity is headed by an effective board that provides strategic leadership in line with the charity’s aims and values.
This section explores the idea that strong leadership helps in developing an effective strategy but also sets the ethos of the charity.
Boards should assess whether they
- accept collective responsibility for ensuring that the charity has a clear and relevant set of aims and an appropriate strategy for achieving them.
- to the charity’s vision, values and reputation and leads by example, requiring anyone representing the charity reflects its values positively.
- makes sure that the charity’s values are reflected in all of its work, and that the ethos and culture of the organisation underpin the delivery of all activities.
Room 2; integrity
The board acts with integrity, adopting values and creating a culture which helps achieve the organisation’s charitable purposes. The board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly.
This section focuses on how the board makes sure it acts purely in the best interests of the charity and maintains its reputation externally.
The outcomes look for
- The board is not unduly influenced by those who may have special interests and places the interests of the charity before any personal interest.
- The board safeguards and promotes the charity’s reputation
- Members of the board and those working in or representing the organisation are seen to be acting with integrity
Room 3; Decision making, risk and control
The board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment, and management systems are set up and monitored.
This section is about how the board delegates whilst maintaining responsibility and how it decides which risks the charity should take
The outcomes look at
- The board is clear that its main focus is on strategy, performance and assurance, rather than operational matters, and reflects this in what it delegates.
- The board has a sound decision-making and monitoring framework which helps the organisation deliver its charitable purposes
- The board promotes a culture of sound management of resources but also understands that being over-cautious and risk averse can itself be a risk and hinder innovation.
- The board retains responsibility and oversight for decisions it delegates
Room 4 Board effectiveness
The board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions.
This section looks at issues such as how the board is recruited; how it works together and whether trustees are able to ask questions and challenge. Trust is an important dimension of this.
The outcomes look at the relationship between the individual and the collective
- The board has a culture which allows it to be effective including managing opposing views
- All trustees have the necessary skills, knowledge and time
- The chair supports the process of effective working by promoting strong relationships
- Decisions are made collectively and individuals stand by them once made
Room 5 Diversity
The board’s approach to diversity supports its effectiveness, leadership and decision making
This section recognises the strength of different experiences and points of view on a board and encourages boards to recruit people from different backgrounds and with different points of view
The outcomes reflect this rationale
- The board is more effective with a range of perspectives, experiences and skills
- The board ensures the charity pays attention to the principles of equality and diversity
Room 6; openness and accountability
The board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.
This is very much about communication with external stakeholders. It reflects the emphasis the Commission places on public trust in charities.
- The organisation’s work is understood and appreciated by all its stakeholders
- The board ensures that the charity’s performance and interaction with its stakeholders are guided by the values, ethics and culture put in place by the board.
- The charity takes seriously its responsibility for building public trust and confidence in its work.
- The charity is seen to have legitimacy in representing its beneficiaries and stakeholders
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