Twitter is amazing. You can follow anything and anyone, and the abundance of opinions is just mind-boggling. Want an example? Just search Twitter for Flat Earth. Alright, I have probably just made some enemies among Flat Earthers, but on the other hand, Flat Earthers are unlikely to read an article on Charity Governance, so that’s alright. So, it was on Twitter where someone recently voiced their dismay at the rule that prohibits trustee remuneration for charities and demanded that this rule should be changed. I’m not quite sure if this was a serious request or whether I missed the irony, but it certainly got me thinking. Do we really need to change the laws on trustee remuneration? Well, the short answer is no. The long answer is no, we don’t. The question whether or not trustees can be paid is not as straightforward as it seems at first glance, and to say that trustees can’t be paid at all is a generalisation, because under certain circumstances they can. However, I strongly suspect the Twitter user who demanded the rule change wasn’t referring to the exceptions which exist, but was referring to the fact that charity trustees cannot be paid for their services as trustees. I don’t want to go too much into detail about the instances where they can be paid for other services to the charity, and the safeguards that need to be in place, but there is a good guide on the Charities Commission website, should you be interested. But don’t head off to the Charities Commission’s website yet, as tempting as it may be; bear with me for a few moments. Under current legislation, charity trustees can’t be paid for their services as trustees, and just for the avoidance of doubt, there are currently no plans to change this. I don’t think there will be any in the foreseeable future. The role of charity trustee is that of a volunteer. Arguably this is tough, because the trustees are responsible for running the charity, and that’s not much different from being directors in commercial enterprises. In fact, if the charity is a company, the trustees are also company directors, so the burden on their shoulders is quite heavy. And you say they can’t be paid for it? Precisely. It’s unfair, isn’t it? Maybe. But what’s the alternative? Well, getting paid, obviously. But that opens up a completely new can of worms. Let’s just imagine a world in which trustee remuneration is permitted. This would instantly raise a few questions. Who would set the remuneration levels? As the trustees are the most senior members of the charity, it would obviously be them. In other words, it’s a blank cheque. I mean, what level of remuneration would they choose? Sure, some trustees would forfeit their remuneration completely or chose very moderate salaries, but we don’t really need to look at those because they aren’t the ones calling for a change of the law, they are perfectly happy with it as it is. This leaves the trustees that would pay themselves handsomely. In actual fact, it wouldn’t just “leave” the ones that would pay themselves handsomely, it would attract people to the role of trustee who would want to pay themselves handsomely. Without a doubt they would come up with a whole load of reasons why they should be paid what they want to get paid, but the clincher is that there would be no control mechanisms in place to stop them. Sure, the Charities Commission could issue a rule that trustee remuneration should not exceed a certain amount, say x, whereby x could be a fixed figure or a percentage of the charity’s income. Both would cause more harm than good. Let’s say x is a fixed number, say £50k (either per trustee or cumulatively for the entire board, it doesn’t really matter for the sake of this example). Regardless of the charity’s income, the trustees would have an incentive to pay themselves the full amount, even if that meant that there would be not much left to pursue the charity’s objects, which is clearly not in the public interest, or “public benefit” to use charity-speak. On the other hand, if x is a percentage of the charity’s income, what should this include? Income from donations? Sure, because this is a significant income stream for most charities, not including it would skew matters quite badly. But then, should it also include donations in kind? Well, they have to be accounted for as income according to the SORP! Now imagine a charity that receives considerable amounts of donations in kind or pro-bono services. Including those would inflate the level of permitted trustee remuneration without bringing in any actual cash. Similarly, what message would it bring across if we were to include donations? Would you give to a charity knowing that x% of your donation would go straight into the trustees’ pockets? Many people already have a problem with charities’ admin costs and the perceived high levels of senior management salaries, so what would Joe Public think if we included trustees in that group? Yes, I hear you – the trustees would arguably replace senior management and there’d be no need to employ CEOs any more, but can we really be sure of this, or wouldn’t we (in many cases) just add another layer of management (and potentially very expensive one as well)? Yet, on the other hand, we cannot exclude donations (and grants, for that matter) from x because that would put charities which heavily rely on them (and let’s face it, that’s a lot of charities) at a significant disadvantage. This all doesn’t even take into account the inherent scope for abuse of the core principle of charities: public benefit. Charities have to operate for the public benefit, not for the trustees’ benefit. Allowing trustee remuneration would water down this core principle, and with it public trust. This takes us to the next problem: what would prevent someone from setting up a charity for their own benefit? Let’s take someone who likes parrots. Ok, that's quite random, I was thinking of cats, but couldn't find a decent cat picture (believe it or not), so parrots it is. So, what would prevent someone from setting up a parrot charity (or a cat charity) with themselves as a trustee, just to secure an income? This would completely break public trust, and that’s not what the charitable sector needs at the moment. After years of negative publicity, mainly brought upon us by a few black sheep, the Third Sector and its regulator have a duty to strengthen public trust, not to erode it. So I'm afraid no, dear Twitter user, changing the laws on trustee remuneration is not a good idea. Now, back to the Flat Earth Theory ...