An Assured Unitary Governance Model
Philip Kirkpatrick, deputy managing partner of Bates Wells London LLP offers hope to strengthen governance and balance in expectations of trustees. He feels that an assured unitary governance model offers assurance for boards and organisations they governance.
“We all love change as long as it’s happening to someone else. No one is very keen to change themselves.”
There are alternative ways of doing things. There is a broad structure, and there will be different ways in which people will implement it.
“Trustees are trying to do their best to make sure things are working effectively, and demonstrating reasonable oversight. When things go wrong, trustees are holed up and criticised.”
Philip likes to find the paths through apparent blockages. With this in mind he offers hope of assurance for boards and the organisations they govern.
- Philip is proposing a model that brings additional assurance in form of an assurance board model. So often a model of assurance can be conflated with remunerating trustees. This proposal is not a payment to trustees issue, Philip stresses.
- The assured board fulfils the functions that most trustees think that they’re fulfilling. This governance model also offers assurance to the public.
- “The assurance board, holds executives to account and furthers the interests of member.”
Philip advocates honesty and transparency in this mixed board of directors and non-executive directors. There is a board which could possibly be a unitary board, but it doesn’t have to be predominantly executive with some non-executives. “There are some people within this model who happen to be paid. This is not about paying trustees.” says Philip.
A call to action
4. The message is simple, “Let’s create another board, another group of people, a committee with the role of providing guidance, providing support, reviewing policies, reviewing procedures, reviewing strategy and budget, commenting on them.”
5. “I’ve proposed the assured unitary governance model. This model of assurance is not new and untested in the commercial world. Also it is not actually new and untested in the charity sector” says Philip.
I’d be very interested in hearing the views of people about it and listening to criticisms of it.”
6. It is different moving to this structure from an existing charitable structure. Moving move from an existing charity would almost certainly need Charity Commission consent. It would be more complex with a Scottish charity
A generous offer
7. Philip Kirkpatrick finishes with a generous offer “If someone is genuinely saying I want to set up a new organisation that will use this structure, talk to me and I might be able to say, “look I really like what you’re planning to do, I’m willing to create the structure for you without charge. Let’s get it through the Charity Commission and prove the concept”.
Philip Kirkpatrick is deputy managing partner of Bates Wells London LLP Philip particularly enjoys the challenge of structuring new ventures and finding the best ways to implement his clients’ great ideas. His clients are nonprofit organisations of all kinds as well as individuals and commercial companies engaging in philanthropy.
00:00:00 Paula: Welcome to “TesseTalks” with your host Tesse Akpeki and cohost Paula Okonneh, where we share with you top leadership and management strategies. This continues to be a journey of discovery. We have learned and we’re learning that leadership is personal and professional, and we hope you will walk with us in this adventure. Our guest today is Philip Kirkpatrick, and we are going to be talking about assured unitary governance, a new model. Before we start, I need to let you know who Phillip is. Phillip is a partner in the charity and social enterprise department at Bates Wells. He advises charities, social enterprises, and other public and social benefit organizations, on governance, charity, law, corporate, and commercial law and regulatory issues. Phillip has sat on several charity and nonprofit boards, and was instrumental in establishing the “Bates Wells Foundation and the Steven Lloyd awards, which that charity runs. And supporting innovative and early stage projects to achieve meaningful social change. Welcome to “TesseTalks”, Phillip.
00:01:29 Phillip: Thanks very much, Paula.
00:01:32 Tesse: Hi Philip, it’s lovely to see you again. For people who are listening, I’m seeing Phillip and I’m always happy to see him. Phillip, I was reading an article about you that you had written. And in that article, you talked about the speech of Roosevelt and I quote the piece there. “It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood who strives valiantly, who errs, who comes up short again and again”. So Phillip, I was kind of this struck me and, I’m so curious about how in this kind of looking at trustees, they come up short?
00:02:20 Paula: Well, first of all, thanks. I love that bit of a speech. It’s a famous bit of a speech by Roosevelt, was often just quoted as the man in the arena. And it’s so easy in our massively critical world and tied as we are to social media and stand by attacks on people and that you know. We’re all just hypercritical of the man in the arena or the woman in the arena. And we don’t give them the credit for being there for doing it. And especially with charity trustees when they’re doing it for us. So it’s sort of, it really struck a chord when I re-read that. So, I mean, what, well, trustees, why do they fall short? Well, I mean, Oh, gosh, who hasn’t sat on a board and felt they’re falling short? Most of us, if we’ve got any kind of self-awareness, we’ll recognize that, sitting on boards we are falling short. And I think it’s particularly difficult being on a board with the expectations the public now has on us to essentially be omnipresent, to be omniscient, to be omnipotent. And you know, everyone seems to expect that when anything goes wrong in a charity, the charity trustees who are going to carry the can, are responsible for everything. And the reality of the modern large charity, and in fact, that’s probably been the case of a large charity for generations, is that can’t be true. And I think it’s something that used to be understood and is no longer understood by those who really need to understand it. Large charities have, large groups have staff who are experts in their fields, usually. And they have boards who may be there for a board meeting once a quarter. That would be typical, probably sit on a committee or two. And their touch points with the organization are periodic. They’re not deep, they don’t have time for them to be deep. And really the law doesn’t expect those touch points to be deep. But the regulators, and the public, and the politicians do seem to expect those touch points to be deep. And when things go wrong, despite the role of the trustee simply being really oversight, and trying to do their best to make sure things are working effectively, and they’ve got reasonable oversight. When things go wrong, trustees are holed up, trustees are criticized. And it’s not just newspaper, it’s not just ignorant people who don’t know how charities work, it’s the regulator. Sorry, that was a long answer to a very short question. Sorry, we’re paid by the word, you know. We just we’ll keep going.
00:05:04 Paula: I love that! Because I am not part of this, but I have been reading up a study, reading up your article about Assured Unitary Governance. So I realized that you suggested a new model of governance. Can you elaborate more on that? Because I started reading it and I’m sure a lot of people would love to hear more about that.
00:05:23 Phillip: Sure, sure. I was asked to do a talk a while ago. You know, what are your top three tips for the, governance over the last year? And I was trying to work out what they would be, and I was sitting down one morning, and I happened also to be in the middle of a charity commission investigation into one of my clients. And I was getting more and more angry. I thought, well, what is my top tip? I mean, my top tip is probably, you’d be mad to be a trustee in the current environment. Which I don’t want it to say, and I don’t want to believe that. But I was just very conscious. We’d been helping Oxfam through the Haiti inquiry. We’d be helping the Kids company trustees. We were in the middle of a charity commission inquiry under preparation for court case in relation to the kids company, trustees. I was dealing with another large national charity in an investigation, and several, several others. And it just occurred to me how difficult it was for these trustees. And I thought, well, also, we’d seen the sort of so-called fundraising scandal where trustees holed up before a parliamentary committee, and criticized because of the fundraising policies and procedures of organizations. And these are organizations that have directors of fundraising, chief executives, finance directors, whole teams of fundraisers, working on policy and procedure and so on. And the trustees were nevertheless expected to know everything, and they were the people being dragged up. So I thought, well, shall we be realistic about, if we’re saying that you have these degrees of responsibility. And let’s face it, the directors of kids company, were sought to be disqualified as trustees for their process. You know, it’s a quasi penal action in the courts. If we’re saying that you are responsible, how can you genuinely be responsible when your function is also not to be there all the time and not to know everything? And you’ve got regulatory stuff saying, you’re not supposed to interfere too much, and regulatory stuff saying, well, if you don’t interfere enough, we’re going to get you. So I thought, well, let’s be real. Who are the people who really are in control? And there’s a definition in English, charity law, and the Charities Act. The definition of a charity trustee, that the charity trustees, are persons with the general control of the management and administration of a charity. And I thought to myself, well, who genuinely has general control of the management and administration of a charity. And it’s not really the people we call the trustees ,and anyone knows if you actually have control in that way, it’s a full-time job. And we’ve got people in charities who are the directors of charities, they’re called the directors of charities. Well, why don’t we just be honest with ourselves and admit that they really are fulfilling the function of being charity trustees. Let’s say the chief executive, the finance director, the sort of senior management team, in an ordinary commercial company, they would be directors of that company. What is different about a charitable company? Or non-company charity? Why are they not in the position of director or trustee? And it’s just because that’s how it has happened. And I thought, well, why don’t we just be honest about that? Say they are, and we’ll have a mixed board of directors and non-executive directors. But then where does the assurance come? And there’s a great anxiety in the sector where, you know. Charities don’t exist for shareholder benefit and for private benefit. There’s no group of shareholders holding the board to account. There’s an external regulator, but it has limited time and reach. So how do we make sure that that assurance that the public needs from charities is being given when perhaps most, nearly all the board might be executive? How do they get appointed? Who decides on their remuneration? Who is doing what we thought the role of trustees was until it started becoming what people now seem to think it is, which is knowing and doing everything. And I thought, well, let’s create another board, another group of people, a committee, and let’s give them the role of providing guidance, providing support, reviewing policies, reviewing procedures, reviewing strategy and budget, commenting on them and take away from them, the responsibility and liability of things going wrong when they do that. But giving them specific functions, like appointing the non-executive directors of the board, determining the remuneration of people on the board. And basically acting like a sort of super membership of a charity that has a membership. So basically fulfill the functions that most trustees think that they’re fulfilling, but don’t have the liability. They therefore give assurance to the public. And that’s why I’m calling them the assurance board. And then there is a board which is a unitary board, which would probably be, but it doesn’t have to be predominantly executive with some non-executives. And hey, Presto, that’s really how most other organizations work. So if you’re not a charity, that’s how most other kinds of organization work and it somehow works.
00:11:09 Tesse: Yeah, I’m really interested in this. Cause you know, in a previous life, I actually started my life in the commercial sector. So this is very similar in terms of the accountability in that sector. And I think it brings more clarity. So in relation to assuring people who might have doubts, anxieties about this. What kind of reassurance, what would be a reassuring message to them, that this is not a complex thing to do is reflect and reality?
00:11:35 Phillip: Yeah. Apart from it’s Phillip’s idea, so it must be all right. You know.
00:11:38 Tesse: That works for me , that works for me for sure.
00:11:45 Phillip: People hate doing anything that’s new. I mean, particularly, I mean, charities people sort of are generally anxious. They don’t necessarily understand the regulatory environment fully. They’re rightly therefore anxious about are they doing the right thing? And they’re very conscious that they’re dealing with essentially public property and they’ve got to act well in the interest of the public and society at large. And so they don’t want to kind of rush themselves into something that is new and untested and so on. But how new and untested is it? Well, it’s not new and untested in the commercial world. So it can be found to work there. It’s not new and untested in many other forms of life where these structures exist. And also it’s not actually that new and untested in the nonprofit sector, and in the charity sector. There are unitary boards in the charity sector and they’re working adequately. And it’s very common to have paid boards and unitary boards. In fact, even fully paid boards in the housing charitable sector in the UK. So these structures exist. And actually what I am proposing is creating that kind of structure and building onto it additional assurance in form of that assurance board. I guess the question might be for those people. Well, how do I know that I am not going to be a trustee and a director? I mean, you just have to take legal advice. But I think most people, when we structure something like that would be clearly able to say whether you are not. In the same way that, you know, you wouldn’t expect to be a trustee or director, if you were a member of the audit committee and not on the board, just because you’re on the audit committee. So yes, it’s less revolutionary than it might seem.
00:13:39 Tesse: I totally love it. But Paula has a few questions. Because Paula you are mathematician, you know, kind of IT guru, you know, all those things. So your questions matter, what questions come to your mind?
00:13:50 Paula: My question is very simple. So there;s something that’s common, I think in the whole world, which is change is hard. Everyone resists change. So that was going to be my question. What resistance have you had to the new? It sounds like the new and better. Yeah, but what resistance have you had to that
00:14:08 Phillip: A number of people have said, oh, that’s a really good idea. And you know, when I posed it as an idea, thousands of people took a look at it and I got lots of compliments saying, this is very interesting. And one or two people saying, oh, this is all lawyers again just trying to get trustees to be paid, which is completely not what it’s about. What it’s about is recognizing that there are some people who happen to be paid and let’s call them trustees, not let’s pay trustees. So no one has said, well, let’s do it, so we’ll see. One of the challenges has been well, if I’m not responsible for everything, you know, if you’re taking away all of that responsibility, why would I be interested in doing this. That’s a valid point of view, if people want that responsibility. They want to have control then don’t adopt the structure. I would have thought there’d be quite a lot of people who actually didn’t want to have liability, and didn’t need to have control, but wanted to have a voice, and a big voice. So that’s the kind of pushback. I think, it’s also true to say. I mean, I like your point about change. Change is difficult. I would say we all love change as long as it’s happening to someone else. We don’t, no one is very keen to change themselves. But there is a legal difficulty with it. So I’m likely to set up a charity and using this structure tomorrow, the charity commission would, as long as it met, all other charitable conditions would need to register it. It can prevent registration because we had a unitary board and an insurance board, indeed even a fully paid board, if that was how it was set up. It might question it, it might want assurance about that, but the structure would give them that assurance. That’s different however from moving to that structure from an existing charitable structure. Because most charities will have restrictions on people being paid to be on boards and employees, because that’s what we’re talking about being trustees. And the statutory power to pay would not allow the inclusion of people being paid to be trustees. And it would not allow people to be employees on the board. So if you wanted to move to this from an existing charity, it is almost certain that you would need Charity Commission consent. It would be more complex with a Scottish charity than with an English charity because the Scottish legislation is different.
00:16:39 Tesse: You know, Phillip and I, we just kind of have this amazing ability to think on similar lines . Cause that was going to be my next question about, you know, England and Wales and how that’s different from Scotland. So you’ve already answered that question. Is there anything else that the charity want you to consider moving to this model might want to reflect on before making that decision Phillip?
00:17:01 Phillip: I think the main thing that the charity would need to reflect on, is why this would be good for it. The board has to take decisions that are in the interest of the charity. So why would this be beneficial for the charity? What advantages would it give? And for some, they may well come to the conclusion that they’re perfectly happy the way they are. There’s no real advantage to changing and the cost of making those changes. So amending your constitution and creating a new board and applying to the charity commission, which you would almost inevitably need to engage lawyers to do, wouldn’t be worth it for you. There will be others who are thinking, do you know what? We are struggling to find trustees to take on the responsibility that they now recognize society requires them to take on, and are nervous about it, and are resigning from other boards and are not taking on new trusteeships. That is definitely happening. I know that is happening. I’ve met people who are doing that. So if you find you’re in that situation, you might think, well, If I can assure people about the role, then maybe they will take on that different role, which oddly is an assurance role.
00:18:24 Tesse: I really love this. And then one of the things that excited me is, no primary legislation needed no secondary legislation needed. It just kind of knowing that there’s change needed in mindset. And for me, it was the freedom that this can give. It was like one can do, I can do you can do what is passionate in relation to the mission of the end, the purpose of the charity. And that I think is bliss. But, yeah, it’s all about change and actually moving to something that gives that freedom, it sounds like Phillip.
00:18:53 Phillip: I think so. I hope so. It’s nice to hear you excited about it.
00:18:57 Tesse: I’m very excited.
00:18:58 Phillip: I was quite pleased. I mean, in some ways it sounds complicated, but actually it’s really quite simple. It’s not such a complex idea. It’s not as massive a change, I think that some people will think. It’s open to misinterpretation as of course it has been, and people saying, well, you know, this is all about paying trustees, which it isn’t.
00:19:20 Tesse: Yeah, it’s come kind of easy to conflate things. I mean, from my kind of, my governance hat on, I see that it would bring more clarity to what is happening, and actually reflect more reality in terms of power balances and the conversations people can have an actually real accountability streams. I think this is an answer to that. But then I love these kinds of things, simple and concise, and I think very easy to implement provided people want that.
00:19:47 Phillip: Yeah I’m subject to you needing regulatory consent to make the move to have payment. Just coming back to Paula, you asked about challenges I’ve had to it. And actually one of the challenges was, and it’s come from a number of people. You know, how can you have executives on the board? Who’s going to hold them to account. Who’s going to make sure they’re not just doing it all for their own benefit. And I’ve been quite disappointed by those questions. I mean, in a way those questions have to be asked, but also they’re quite disappointing questions, aren’t they? There’s a sort of suggestion behind them that executives in charities don’t have their roles in order to further public purposes and really champion the charity and they’re all in it for themselves. This is a sort of question you might expect to come from certain parts of the media, but not really from within the charity sectors itself. Well, I’d hope people would recognize that they are the lifeblood of the organization. And of course, in any case, they are held to account by the non-executive members of the board. There will be non-executives, there may be paid non-executives, but there will be non-executives. And by the assurance board, which will perform the function of members, and it has powers of removal and so on. So, the powers are there, and I mean, who holds the executives to account in a commercial company that exists to further the interests of members, the members.
00:21:13 Paula: And just sitting there thinking I’d love if we could continue this conversation, got to to wrap up. So all what you said, how can people, our listeners hear more about you, learn more about you? Are you online? Do you, are you on LinkedIn?
00:21:27 Phillip: Well, I mean, obviously from our website, the Bates Wells website. There’s information, and there’s stuff on the more detailed explanation of what I’ve proposed as the assured unitary governance model. And I’d be very interested in hearing from people about it and criticisms of it. And what would they be worried about? I posted ages ago on LinkedIn about it, I do LinkedIn every now and again. And occasionally I’m on Twitter, but I don’t really do so much work stuff on Twitter. I love it less and less. But, I mean, I’ll throw this out there. I mean, if someone is genuinely going to say, I want to set up a new organization that will use this structure, talk to me and I might be able to say, “look I really like what you’re planning to do, I’m willing to create the structure for you without charge, and let’s get it through the Charity Commission and prove the concept”.
00:22:23 Paula: I love that. I love that you’re open to hearing other suggestion. And I want our listeners to hear that, you’re open to other suggestions.
00:22:32 Phillip: And there’s not one only one way of doing this, you know. There is a broad structure, and there will be different ways in which people will implement it. Just like there are different ways in which people implement the existing normal charities structures.
00:22:46 Paula: Absolutely, absolutely. Well up to our listeners, we have unfortunately come to the end of this interesting interview with Phillip Kirkpatrick, and we want to thank you all for tuning in. And to our faithful listeners, we ask you again to head over to Apple podcast, Google podcast, Spotify, anywhere else where you listen to podcasts and follow us or click subscribe. And if you have any comments on what you just heard, please feel free to head over to “Tesseakpeki.com/tessetalks”, leave your comments and let us know what you thought of this amazing interview today. Thank you so much Phillip for coming onto “TesseTalks”.
00:23:34 Phillip: My pleasure entirely Paula and Tesse. Thank you very much.
00:23:37 Tesse: Phillip you’re always amazing, thank you. I have to get that one in because it’s true.