A pathway to better charity governance

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Charities need to raise their game, accept their duty of care to vulnerable people, and back whistleblowers

After the Oxfam imbroglio it’s clear that charities must reinvent their corporate governance and do much of it in the glare of the public eye.

It’s now dawning on the sector that whatever form the new ministerial controls take, there is still a huge need for UK charities to impose tighter management processes globally. In a sector not noted for embracing compliance systems there’s deep concern over how to make such steps viable.

And whatever the new legislation is, we shouldn’t forget that charities already grapple with plentiful financial guidance from HMRC and the Charity Commission. Even if there isn’t a complete change inspired by the minister for international development, senior teams at Oxfam or UK-only charities could soon be trying to deal with old and new HR processes and compliance rules.

To survive all of these demands charities will have to follow the example of the private sector. For years multinational companies have been putting more resources into global-level ethical rules and compliance systems in the wake of high-profile corruption and supply chain-related slavery cases. Charities are now in the same position. There are three main reasons for this sea-change.

First (as charities are discovering), global firms have found the reputational damage from media exposure of unethical conduct or operations untenable.

Second, the arrival of 2010’s Bribery Act and 2015’s Modern Slavery Act have highlighted the government’s willingness to bring moral questions into the courtroom by enshrining the duty to prevent inappropriate behaviour in global operations. ‘Ethical’ legislation has also increased the likelihood of prosecutions and heavy financial penalties for companies’ misconduct or where they did not have the required preventative systems in place. Some charities could well follow.

Third, it’s apparent through worldwide support for common ethical standards (such as Singapore, Peru and the Philippines’ adoption of the ISO 37001 anti-bribery standard), that governments are acting in concert to create an expectation of higher ethical policies. In a globalised world all nations demand the highest standard of conduct from foreign aid agencies – just as they do from multinationals and their supply chains.

Transforming the management of ethics and compliance in any global operation is a huge task. However, based on large companies’ experiences, in and out of court, practical and consistent guidance for establishing global oversight and ethics is now available.

Whether it’s emerged from the prospect of big fines, pressure from activists, or the realisation that governance needs dragging into the 21st century, multinationals’ senior management teams and external experts have set up frameworks to redefine corporate governance and instil best practice locally. Charities can follow suit.

There’s no easy third sector solution because each charity’s ethos, remit and culture are so different. But the answer will begin with charity boards committing to a ‘top to bottom’ ethical culture and assessment of the risks they face. Their management teams will have to lead the development of practical ethics policies, enforced by monitoring and compliance programmes. Charities will follow global firms in embedding common governance and reporting systems across complex operations and difficult political landscapes. In one recent case an international charity facing bribery allegations developed a framework for compliance with guidance from the UK Ministry of Justice on the Bribery Act, with help from consultancy advisers.

Charities need global management and compliance structures that investigate, transparently report and build processes to stop sexual misconduct, bribery and slavery. Whistleblowing can be made compatible with new compliance programmes, even in far-flung operations. Revitalised management and HR systems will drive up organisations’ standards while eliminating the rogue behaviour of the minority.

Charities are facing gruesome headlines, along with greater requirements for safeguarding and compliance. They’re also facing the need for additional HR resources to comply with these requirements. The private sector experience is, however, that ethics-driven governance and compliance systems are viable, practical, and proportionate to the risks faced.

Kristy Grant-Hart is CEO of Spark Compliance Consulting

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