Governance challenges for membership organisations

GGI CEO Professor Andrew Corbett-Nolan considers a dilemma for charities and membership organisations and the need for skills-based trustee boards

For many charities and all membership organisations, governance is a balancing act between accountability to members and ensuring an effective board. In some organisations, trustees are elected by members, offering a democratic approach to leadership. But this system can bring challenges, particularly when it comes to ensuring that the board has the right mix of skills and experience to meet its strategic and regulatory responsibilities.

When trustees are chosen through elections rather than a skills-based appointment process, there is a risk that boards may lack expertise in key areas such as finance, law, fundraising, and digital transformation.

Also, we have noticed in larger charities that even where relevant skills are held, elected trustees may not be used to sitting on a board or operating at such a senior level. They may need support to master the non-executive role. While enthusiasm and commitment are invaluable, a skills deficit or stepping outside the trustee governing role and into management can leave charities vulnerable to poor decision-making, governance failures, and regulatory non-compliance.

The challenges become even greater in times of financial or operational stress, when high-quality governance and an effective board are most needed.

A growing regulatory and reputational risk

The Charity Commission and other regulators have made it clear that governance must be robust, strategic, and effective. In its guidance on trustee boards, the commission emphasises the importance of ensuring trustees have the necessary skills and experience to lead effectively. However, charities where the board has a high proportion of elected trustees may struggle to demonstrate this assurance, particularly when decisions become contested or complex regulatory issues arise.

Difficult times accentuate the tendency for trustees to step out of their governance role and into management, often resulting on poor decisions being made and creating a problematic relationship with executive management.

Actions have consequences. We have seen too many examples of a bad situation made worse in just this way. The problems the charity was navigating its way through can engulf the organisation and we have all seen some high-profile cases where governance weaknesses have led to public and regulatory scrutiny, damaging both reputations and financial sustainability.

When decision-making becomes factional or when elected trustees do not bring the necessary expertise or level of senior discernment, the consequences can be severe. Charities risk becoming inward-looking, disconnected from their strategic purpose, and, in the worst cases, failing to meet their legal duties. A striking example of this occurred in 2018 when the Royal National Institute of Blind People (RNIB) faced regulatory action from the Charity Commission due to governance failures that led to safeguarding concerns. The lack of necessary skills and oversight on the board contributed to significant operational failings, demonstrating the real-world risks of an unbalanced trustee structure.

We’ve analysed the RNIB case in more detail in a separate article.

The pigs’ proclamation

A solution to this challenge is to move towards a hybrid model of trustee selection, where some trustees are elected to maintain member representation, while others are appointed based on their skills and experience. A useful extension of this is to hold a skills assessment in some way or another as a prerequisite of being eligible to stand for election. This approach allows charities to retain whatever democratic legitimacy elected trustees bring while ensuring they have the expertise required to function effectively.

In the case of the RNIB the Charity Commission held the organisation to a 75% appointed and 25% elected board which GGI feels is about the right balance. We have worked with organisations that have felt that a majority of the trustees should be elected so they can out-vote the appointed trustees which points to an unhelpful, deeper-seated cultural malaise and governance being confused with power. Election or appointment should be understood as routes to board membership, not classes of trustees. It is critical to avoid a world of ‘all trustees are equal, but some trustees are more equal than others’.

Avoiding sending Boxer to the knacker’s yard

The key considerations are the role of induction, training, and governance reviews. Particularly where trustees are elected, they must be properly supported to understand their responsibilities and develop their skills. Charity Commission guidance is a fast-moving terrain and keeping up to date is important and takes trustee time, but our view is that this is an essential investment. Good boards need working at and regular skills audits, board development programmes, and external governance reviews can help mitigate the risks associated with elected boards. Charities should turn to independent support to strengthen their governance while respecting their unique structures and values.

Examples of essential interventions that help charities get the best from their board:

• Independent governance reviews to identify risks and opportunities for improvement.
• Board development and training to enhance trustee effectiveness. This is critical even in stable and effective organisations, and the model of the high-performing board provides a useful developmental framework.
• Introducing board assurance frameworks to help charities demonstrate regulatory compliance. Too few do.
• Programmes of governance reform to ensure charities can modernise their structures while staying true to their missions. Every board should be focused on its own ongoing improvement.

Sitting on the board of a charity or a membership organisation is both a privilege and a service. It requires professionalism and focus, including working as a team member and at the right level.

Being elected by your members to a position on a board can be an important contribution to a balanced board. Indeed, in organisations where membership is the primary reason for the organisation’s existence, such as a professional society, as opposed to an organisation with members, being elected by the membership is a part of the organisation’s identity.

Matching this with having the right skills and experience needs careful structural navigation for sure, but even more crucial is the ongoing ‘board building’ work such as the examples listed above.