NCVO Advises Charities to be More Transparent on Executive Pay

The National Council for Voluntary Organisations (NCVO) has produced a report which urges charities to publish full details of senior executives pay in order to maintain public trust. The report concludes that despite legally having to provide an indication of the number of staff in pay bands in excess of £60,000 per annum, charities need to provide specific detail to maintain the public’s trust.

The report reveals that 14,942 charity executives were paid more than £60,000 a year – over 3,000 more than previous estimates. Of that, more than 2,600 were paid over £100,000 a year, and 55 more than £250,000 a year in 2011.

We have been advising charities on their governance structures for many years, have helped many organisations through the governance review process as well as making constitutional changes which are needed to deliver governance change.

Media scrutiny prompted report

The inquiry was prompted by media scrutiny of charity chief executives’ pay, and was tasked with examining arguments about appropriate remuneration levels as well as the relationship between this and public trust and confidence in the sector.

Specifically the NCVO suggested that charities publish a remuneration statement explaining their pay strategy and stating the individual remuneration of their highest-paid staff by position and name.

Charities who have a gross income of more than £500,000 should accompany such a policy with a summary of arguments used by the board of trustees to justify the amounts involved and how they reflect the charity’s ethos.

Data should be visible on website

It added that the data should be easily accessible, preferably clearly on the charity website and that trustees should consider many points when setting pay including: the purposes, aims and values of the charity, beneficiary needs, impact on overall pay structure of employees, skills required, the sustainability of the charity and the likely impact on the views of beneficiaries, donors, funders and volunteers.

The review also said charities should not normally pay executive bonuses to staff, after research last year found that some aid charities used such schemes to reward staff.

Leading charities express support

Chief executive of the Honorary Treasurers Forum Denise Fellows commented: “Following the media attention last year, ensuring best practice on executive pay has been a grey area for some of our members. Charities have a duty to ensure transparency for the public, donors and beneficiaries, not only for the levels of pay but also for the thinking behind the levels of pay by publishing in annual reports and on their websites.”

Macmillan Cancer Support also welcomed the report’s recommendations. Chairman Julia Palca said: “While trust in charities is the highest it has been for the last few years, we welcome this report to help ensure the sector takes the steps necessary to promote transparency. We will review these recommendations in detail, taking into account the implications on supporters, staff and most importantly everyone affected by cancer.”

Priti Patel, the Conservative MP who assisted with the research, said: “This report should trigger a transformation in the way charities are held to account by their trustees, members and donors.”

However, it should be noted that just over 90% of registered charities have no paid staff and are run by volunteers and fewer than 1% of these pay a member of staff £60,000 or more.

For more information about reviewing your charity’s governance structure, contact our charity law team on 01895 207809 or email charities@ibblaw.co.uk.