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Smoke signals from the SORP Committee on chief executive pay

Last week the Charity Commission’s SORP (“Statement of Recommended Practice”) Committee published details of what charities can expect from the new and long-awaited SORP 2015, including the Committee’s recommendations on the vexed question of charity chief executive pay.

Executive remuneration has been the subject of impassioned debate in recent months, leading newspapers to heap opprobium on so-called “fat cat charity bosses”, and stakeholders to call for maximum transparency under the banner of maintaining public trust and confidence. From within the sector, the response has come that executive remuneration simply reflects the reality that today many charities are highly sophisticated and complex organisations, whose leadership and management requires the time and commitment of talented individuals – and a salary package to match.

The new SORP is no silver bullet in all this, but what it does clarify is the level of disclosure the Commission is likely to expect from charities in the near future. It had previously been suggested that the new SORP might require charities to disclose both the salaries and job titles of their highest-earning employees – a suggestion which was met with concern within the sector on the part of those who felt that full disclosure could have a damaging effect, not only on those responsible for setting salaries, but also on the individuals themselves. One respondent to the SORP consultation suggested that information on salaries could be used in a defamatory way, and asked whether the Commission might be moved to take action where particular salaries were considered to be too high.

However, while full disclosure at the top end looks unlikely to materialise, the number of charities required to disclose general salary information looks set to rise. At present, only audited charities (i.e. those above the income threshold of £500,000) are required to disclose salary information, which is presented in bands of £10,000 for those paid over £60,000. Under the new SORP, it is expected that this requirement will be extended down to all charities which prepare accruals accounts, i.e. those with a gross annual income of £250,000 or more. Surveys of executive pay have suggested that the number of charities in this income band which pay salaries in excess of £60,000 is likely to be low, so the practical effect of this extension remains to be seen.

The new SORP is expected in June, so for now it remains a waiting game. The smoke signals from the Commission are unlikely to satisfy those calling for full disclosure on remuneration, but the hope may be that more “broad-brush” disclosure will reassure those seeking greater transparency, while protecting remuneration committees – and the chief execs themselves – from excessive levels of personal scrutiny.

For most charities, ultimately it is likely to be business as usual – though the NCVO’s Executive Pay Inquiry is also due to publish recommendations for setting pay levels in the spring, which may add more to the debate.

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