The Charity Governance Code (the Code) that was issued in 2017 has undergone a “refresh”.
The Charity Governance Code steering group was tasked with reviewing the Code’s content and impact and produced a consultation report in August of this year. Over 800 charities and individuals responded to the consultation, which reflects the interest in the Code and the widespread use being made of it by charities. The introduction to the Code notes that while its recommended practices are not legal or regulatory requirements, it is “deliberately aspirational” and aims to be a tool to support continuous improvement in governance by charities.
The "refreshed" Code was launched on 8 December 2020 with amendments to the Diversity Principle and the Integrity Principle (two of the seven principles identified within the Code). In this briefing, we set the updated standards and recommended practice that charities should strive to achieve in relation to these two principles:
1. Equality, Diversity and Inclusion Principle
The consultation revealed a strong consensus among respondents that the concept of diversity has advanced since 2017 and that the Diversity Principle should be updated.
The Principle has been renamed the “Equality, Diversity and Inclusion Principle” to reflect the equal importance of the principles of equality, diversity and inclusion, and the key role they play within both the governance of charities and the services that charities offer.
It is recommended Trustees should ensure that these principles are embedded within their charity, that they work to reduce any obstacles to participation among trustees, staff, volunteers and beneficiaries, and that they embrace the benefits that different perspectives and experiences bring to charity boards and the work and activities of the charity more widely.
The Code does not stipulate any specific targets or quotas, although it does state that it is important for the principles of equality, diversity and inclusion to become embedded in the charity. It recognises that the incorporation of equality, diversity and inclusion is an ongoing journey which necessitates regular reflection on progress.
Four recommended stages are set out in relation to how a charity may embed these principles:
- consider why equality, diversity and inclusion is important for the charity;
- set out tailored plans and targets;
- review and monitor the charity’s progress; and
- publish information on the charity’s performance.
It is vital that a charity considers how equal, diverse and inclusive it is and at what stage it is at. It is suggested that Boards should consider whether it should have a diversity policy in place or, if it already does have one in place, determine if any updates should be made in light of the refreshed Code to ensure it covers each of equality, diversity and inclusion.
Other potential actions for Boards (and particularly those of larger charities) may include reviewing role descriptions, incorporating questions about the culture of the charity in exit interviews and conducting open discussions about inclusivity, equal opportunities and participation.
2. Integrity Principle
The Integrity Principle has been enhanced to emphasise the importance of values, ethics and culture in helping to achieve a charity’s purposes. It is noted that a charity should have a welcoming and supportive culture and reflect its ethics and values in everything that it does.
The Code now incorporates the recently-developed NCVO ethical principles as additional good practice that seeks to promote confidence in charities and create a supportive environment. It also calls for an established link between the charity’s culture and its values. Objective decisions should be taken, and power imbalances should not exist.
Following the increased consideration of safeguarding all those who come into contact with a charity, the Code now includes “the right to be safe”. It is emphasised that trustees should go beyond the legal minimum in relation to their safeguarding responsibilities, policies and practices, to promote a culture in which everyone feels safe and respected.
The Code recommends that the Board:
- ensure decisions and actions are consistent with the charity’s values;
- address and prevent any potential power imbalances;
- adopt and follow a code of conduct that sets out expected standards of ethics, probity and behaviour;
- examine how the charity is seen by the people and organisations who are involved in its work and by the wider public; and
- considers following non-binding rules, codes and standards, for example the ethical principles (mentioned above) and other good practice initiatives.
As a result, it would be sensible for Boards to ensure the culture of their charity supports the charity’s values and that behaviours, policies and procedures are in place to ensure that everyone who comes into contact with the charity as well as the wider public are assured of its values and hold it in a position of trust.
The “right to be safe” and the related recommendations are also applicable to charities that do not work directly with children or vulnerable people. This is to ensure that there are protective measures in place for anyone who comes into contact with the charity.
The “refreshed” Code reflects some of the cultural and societal shifts seen over the past three years and ensures the Code continues to set a high benchmark for charities examining their governance and striving for best practice.
This may be an opportune moment for charities to examine their governance with the aid of the revised Code and as part of the preparations for emerging from the pandemic during 2021.
If you require further information about anything covered in this briefing, please contact Ben Pass, Isabelle Dean, or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, December 2020