Why it’s irresponsible to insist that trustees are unpaid

It’s rather trendy to suggest that the work of the voluntary (charity) sector is enhanced by the fact that trustees are unpaid. It’s bulls**t. You can tell by asking the simple question by which most important questions in this sector can be resolved:

What would* the beneficiaries want? Put another way, what serves beneficiaries best?

The beneficiary’s perspective is the only one which matters. Let’s consider a child in India who can’t go to school. Would they rather be served by:

  1. People who have taken the time to understand the barriers they face to going to school, and to study the data about the relative effectiveness of various approaches. [Bear in mind that approaches differ wildly in their cost effectiveness. Some ways of purifying water, for instance, achieve twice as much as other ways. And some ways of ‘solving’ social problems actually exacerbate them.] People who may have worked with these kinds of problems before and/or in India or similar situations. Or
  2. People who haven’t but who are giving their time for free?

Warren Buffett had it right when he said that the problems which philanthropy seeks to solve “have already resisted great intellects and often great money.” They’re hard. Too hard to be left to well-meaning people who don’t actually understand. And too important too: these aren’t parlour games, they are literally matters of life or death – or joy or desperation – for other, real people. Understanding these problems takes time, and most people need to be paid for their time in order to live.

So if we don’t pay trustees, we end up with charities attempting to solve the most important and difficult problems of our complex world who are either:

–          Ignorant, or

–          Too rich to need an income.

Hmm. Hard to imagine beneficiaries voluntarily choosing either of chose over people who actually know what they’re talking about.

‘Ah’, the counterargument goes, ‘but think of all the money that would be spent if trustees were paid’. Yes, but I can also think about the giant amount of money which gets mis-spent because trustees don’t know what they’re talking about, and I can imagine (indeed, I could probably pretty easily prove) that the latter vastly exceeds the former. A false economy, as the economists say.

And a bizarre one. Nobody thinks that MPs should be unpaid, or teachers, or doctors, or the non-executives members of boards of government departments or entities like the Care Quality Commission or the Financial Services Authority. These all operate ‘in the public interest’, as do charities, so the difference is hard to explain (other than by reference to history, which is essentially spurious).

Other pernicious effects follow from trustees being unpaid. First, the charity’s chief executive can’t be a board member. This is just ridiculous. The CEO – who may even have founded the organisation and works on it all day every day – reports to a bunch of people who don’t even have this on their CV. They have no disincentive against making dismal decisions – like firing the CEO. They can be as capricious as they like: and often are. Second, trustee attendance at meetings is really patchy, because any paid work has to take precedence. Not because the trustees are evil or uncommitted, but because that’s how the world is. I used to have a lovely trustee who was a barrister – and guess what often happened when a client called him with a problem half an hour before one of our meetings? It’s simply unreasonable – the point of foolishness – to expect the unpaid to be as committed. Third, it’s harder to get rid of a trustee who’s rubbish. If that’s hard to see, think of it the other way: it’s easier to get rid of somebody if you’re paying them because they’re obviously wasting money.

So charity boards end up with ignorant and/or rich people who don’t turn up, and may be rubbish when they do come. And we entrust some of the most shameful and delicate problems known to man to that? Small wonder the problems persist.

____________

*That this question is stated as ‘would’ is interesting of itself. Beneficiaries rarely get asked. Sure, good charities involve ‘service users’ in the design of their services, but they rarely (never?) get asked about the more fundamental questions about how they are served. Where do they collectively think that funders should focus? Where do they collectively think that any particular funder should focus? What do they think about restricted funding? (clearly they might need the implications explained – as do many funders) Given that beneficiaries are ostensibly central to charities’ entire enterprise, their voice is conspicuously lacking.

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2 Responses to Why it’s irresponsible to insist that trustees are unpaid

  1. Jay Kennedy says:

    Loved your NatWest piece – spot on – but afraid you’re totally wrong here. Your blog is about ‘giving evidence’ but there’s precious little of either in your argument. Where’s the evidence that paying trustees makes them more competent and improves their performance? All of your points rest on that assumption – that remuneration = more commitment, knowledge and quality. It doesn’t.

    There are plenty of people who are crap at their paid jobs who stay in work. In fact, many such people are highly paid. Exhibit A: the directors of a number of Britain’s leading banks. In fact, I’d say the nature of their financial incentives meant they were more interested in short-term personal gain than the long-term sustainability of their companies – their major responsibility – and look at the price society is paying for that.

    On the other hand, there are millions of people volunteering – including thousands of trustees – who do sterling work without being paid – and have no wish to be. It’s just insulting to categorise trustees as a group as a) ignorant or b) rich. You rightly stress the central importance of beneficiaries, but then trash the volunteers who give their time to help them! You seem to forget that for the majority of charities which have few or no staff, the trustee board does most of the work…voluntarily…

    We should focus on strengthening altrustic motivations rather than watering them down by assuming the only way to improve boards is to introduce money into the equation.

    Finally – if you’ve got a paid board with a CEO who is part of it, who is responsible for line-managing and firing whom? It makes the question of dealing with performance harder, not easier.

  2. Thanks Jay.
    Fair comment that the article doesn’t have much evidence. I personally have lots, but, er, it’s about specific experiences and observations and people so I can’t share it with any granularity. I’d refer you to the very excellent report by Panaphur called ‘The End of Charity’ in which they argue/demonstrate much the same.

    I agree, clearly, that payment is no guarantee of quality, as amply demonstrated in the corporate world of late.

    On your last point, a paid CEO who’s part of a paid board reports to the Chair. And hence can be fired by the Chair with permission/support of the board. That’s very clear & standard. The separation of Chair and CEO roles is corporate best practice (as laid out in the Myners & Cadbury reviews of corp. governance I think, amongst other places) – and ignored by people like Stuart Rose!

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