Creating a Board of Directors or Trustees
Every charity has a form of governance, often called a Board. The Board is responsible for ensuring the organisation is being run in a responsible and effective way, and that it is meeting it’s objectives set out in it’s governing documents.
What to look for when creating a Board of Trustees
- Good judgement: Judgment is a must. In many ways, it is THE job of a trustee or Director member. A member with solid judgment keeps you out of trouble and helps you navigate difficult situations.
- Relevant context: A great trustee member needs to have as much relevant context as possible in order to offer actionable and on-point advice. There are four areas to consider:
- Industry: It helps if most members do have industry context in some form (customer, supplier, academic, etc.) and alternatively, someone who is not from your industry or area of work for perspective.
- Business model: A member who understands your business model can greatly things like strategy and cash flow.
- Stage of business: This is more important than it might seem, and is also a driver for changes over time. Just as different stages in a company’s development may require different executives, the same is true of trustee members.
- Function: It really helps to have trustee members who have expertise in functional areas import to the business.
- Wisdom: To have great judgement, wisdom is pretty essential when making critical decisions and thinking strategically about the future.
- Motivation and interest: Trustee work is hard work. There can be a lot of meetings, especially with committee duties, homework, and times when very difficult, delicate, and challenging decisions must be made, often concerning people.
- Style: This is less critical than some of the others, but ultimately a trustee member’s style should be compatible both with that of the CEO and with the other trustee members.
- Effective coach, mentor, and sounding board: An often under-appreciated role for trustee members is that of coach or mentor.
- Courage: Maybe THE most unappreciated trait. Your trustee members need to have the courage of their convictions, as well as the courage to face up to hard truths, and to make tough calls when the answer isn’t always obvious and when there are considerable consequences if the call is wrong.
Directors, trustees and the law
Those running a company limited by guarantee with charitable status are both directors under the Companies Act and charity trustees under charity legislation. This means that they are subject to both company law and charity law in addition to general law. Remember a duty is a legal obligation. Failure to carry out duties as a director can result in fines and in some cases personal liability. It is therefore essential that anyone considering becoming a director of a community anchor organisation is clear about their role and responsibilities.
Responsibility of trustees
Charity law imposes similar, but slightly wider, duties on trustees. These duties are based on common law and reflect the fact that trustees are in a position of trust and have ‘fiduciary’ duties.
- The overriding duty of all charity trustees is to seek to advance the charitable objects
- Trustees are responsible for the proper administration of the charity and must accept ultimate responsibility for its activities. The implementing of certain decisions may be delegated but certain decisions must be made by the trustees.
- Trustees must act reasonably and prudently in all matters relating to the charity
- Trustees must safeguard and protect the assets of the charity
- Trustees must act collectively
- Trustees must act to the best interest of their charity
- Trustees must avoid any conflict between their personal interests and those of the charity.