The 7 pillars of the temple of good governance – The Charity Governance Code

Charity Governance Code: The road map for sector’s future

Governance in the charity sector is not merely about compliance; it’s about leadership, accountability, and the trust placed by the public in these organisations. In the UK, the Charity Governance Code 2017 (last updated in 2020), stands as a vital tool to ensure charities maintain high standards and ethical operations. Currently under review, with the new code expected later this year, the Code has been a cornerstone for steering the sector towards resilience and sustainability. The core of the Code is its seven pillars, each one offering guidance on how trustees can ensure their charity is well-led, well-managed, and continues to serve its mission effectively.

The seven pillars of good charity governance

The Charity Governance Code is divided into seven key principles that help trustees and their boards provide strong leadership and effective management. These pillars serve as a roadmap for good governance:

1. Organisational purpose

The first pillar of governance is ensuring that the charity has a clear, well-defined purpose that is kept at the heart of everything the organisation does. Trustees must ensure that all activities, fundraising, and expenditures align with this purpose. When a charity loses focus on its core mission, it risks mismanagement, reputational damage, and failure to meet the needs of its beneficiaries.

2. Leadership

Leadership is not just about trustees’ vision; it’s about ensuring that the culture of the organisation is reflective of its values and ethics. Trustees are required to set the tone from the top, shaping an inclusive, diverse, and positive environment. Leadership in charities can sometimes be complex, especially where there is a lack of clear lines of accountability or tension between operational and strategic decisions – such as where management relies on the board for operational decisions, instead of it focussing on strategy and accountability.

3. Integrity

Charities hold a unique place in society, built on public trust. Trustees are responsible for ensuring that their charity’s reputation is protected through ethical behaviour, transparency, and openness. Maintaining high standards of integrity is particularly vital in fundraising and financial reporting, ensuring that the charity’s resources are used properly. The pillar of integrity requires robust systems to manage conflicts of interest, safeguard vulnerable beneficiaries and prevent fraud.

4. Decision-making, risk, and control

Effective decision-making is critical to a charity’s success. Trustees must make informed, balanced decisions, guided by sound risk management strategies. This includes assessing financial risks, safeguarding, and ensuring operational risks are well-managed. The COVID-19 pandemic highlighted just how vital good risk management is to charities. Organisations with poor systems in place were seen as unprepared for the sudden challenges they faced.

5. Board effectiveness

For a charity to function effectively, it must have an engaged, informed, and capable board. Trustees must understand their role and be committed to continuous learning and improvement. Regular board evaluations, diversity of thought, and constructive challenge with rigour are key to ensuring that the board functions at its best. However, recruiting and retaining skilled trustees is often a challenge for many charities, particularly smaller organisations with fewer resources to draw from.

6. Diversity

Diversity within the boardroom is essential for good governance. This sixth pillar advocates that trustees actively seek diversity of thought, experience and background in their decision-making processes. Having a board that reflects the diversity of the community it serves, strengthens its ability to respond to different needs and perspectives. However, achieving true diversity is often difficult, as charities can struggle to recruit from outside their existing networks or from groups of beneficiaries that do not engage.

7. Openness and accountability

Charities are accountable to their beneficiaries, donors, commissioners, regulators, and the wider public. Trustees must be transparent in their decision-making and reporting. This includes maintaining open communication with stakeholders and ensuring the charity’s performance is clearly communicated. Accountability is particularly challenging in larger charities where decision-making may be more remote from the beneficiaries, or where multiple levels of leadership may dilute responsibility.

The most challenging pillars for charities

While all seven pillars are essential for good governance, some present more significant challenges to charities than others. Diversity and board effectiveness tend to be the areas where charities face the most difficulty.

Achieving diversity of a board is not simply about ticking a box; it requires intentionality in recruitment and fostering an inclusive environment. Many charities, particularly smaller ones, struggle with this due to limited resources or existing homogeneous trustee pools.

Similarly, ensuring board effectiveness is a perennial challenge. Boards are often composed of volunteers, which can mean varying levels of engagement, experience, and availability, due to other competing priorities. The commitment to continuous learning and development can be harder to sustain, particularly in charities with stretched resources. Smaller charities, in particular, find it difficult to attract trustees with the necessary skills and experience to guide the organisation.

Implications for breaching the Charity Governance Code

While the Charity Governance Code is not legally binding, adherence to its principles is strongly encouraged by the Charity Commission. A breach of any of these pillars can have significant implications. Failing to adhere to good governance principles can lead to regulatory scrutiny, reputational damage, and worse – the withdrawal of funding. For example, if a charity lacks adequate risk management processes, it may face financial instability or fail to safeguard vulnerable beneficiaries, potentially resulting in regulatory intervention.

Moreover, trustees have legal duties under the Charities Act 2011 and are accountable to the Charity Commission. If trustees are found to have acted negligently or in breach of their fiduciary duties of good faith and the Nolan Principles, they can be held personally liable. Ensuring compliance with the Governance Code, therefore, isn’t just about good practice—it’s about protecting the future of the charity.

The Charity Governance Code, though under review, remains an essential guide for trustees to lead their charities with integrity, effectiveness, and purpose. While challenges around diversity and board effectiveness persist, addressing these issues proactively can strengthen the charity sector’s resilience and public trust. In a rapidly changing world, effective governance is more crucial than ever for charities to fulfil their missions and continue serving the communities that rely on them.

Where is your charity on the road map to better governance?

If the information provided above has given your charity the resolve to improve your governance or check where you are on the road map to better governance, why not consider an external Governance Code Audit that we can provide free of charge. We can take you through the 7 pillars, ask some pertinent questions that test the level of governance and provide a high – low risk and high – low impact report with suggestions of measures for improvement. Interested? Then email me at nick.hobden@ts-p.co.uk or direct message me on LinkedIn to find out more.