Charity Trustees and Good Decision Making: What Does it Involve?
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For more information on Charity Law and Charity Trustee Responsibilities contact IBB: http://www.ibblaw.co.uk/services/charities Charity trustees are expected by the Charity Commission to take the best decisions that they possibly can in the best interests of their charity. When making significant or strategic decisions it is important to ensure that they are properly taken. The decisions do not to have to turn out to be right – no-one expects trustees to have a crystal ball – but if they are properly taken then the trustees will usually be protected from being criticised or possibly even sanctioned.
Transcript of Charity Trustees and Good Decision Making: What Does it Involve?
In this article, Jo Coleman, Partner in IBB Solicitors Charities Team looks at decision making by charity trustees. In the charitable context what does good decision-making look like?
IBBSOLICITORSCHARITIESTEAMCharitygovernance
GOODDECISIOnMAkInG
THISBRIEFInGnOTEISOnLyInTEnDEDTOPROvIDEGEnERALGuIDAnCEAnDISnOTInTEnDEDTOCOnSTITuTELEGALADvICE.
• thatanyconflictsofinterestorpotentialconflictsofinterest(whichincludenotonlydirectorindirectpersonalgainbyatrusteebutalsoaconflictofduty)areproperlyidentifiedandmanaged.
JusticeWalkerinScott v National Trust(1998) summarisedhowcharitytrusteesmustmakedecisionsinexerciseoftheirduties.Charitytrusteesmust:
• actingoodfaith,responsiblyandreasonablywhichincludesmanaginganyconflictsofinterestappropriately.(Actingingoodfaithmeansactingwithgenuineorhonestintentionsormotivesandtryingtodotherightthingforthecharity);
• informthemselves,beforemakingadecision,onmatterswhicharerelevanttotheirdecision;
• takeadvice,wherenecessary,fromappropriateexperts,whethertheexpertsarelawyers,accountants,actuariesetc;
• takethedecisionsthemselvesandcannotdelegatetheexerciseoftheirdiscretions(unlessauthorisedtodoso);
• weighupthecompetingfactorsanddisregardirrelevantfactors.
CharitytrusteesareexpectedbytheCharityCommissiontotakethebestdecisionsthattheypossiblycaninthebestinterestsoftheircharity.
RecentCharityTribunaldecisionshaveconfirmedthatdecisionsonkeyissues,suchashowmuchpublicbenefitissufficientpublicbenefit,aredecisionsthatonlythecharitytrusteescantake.SuchTribunaldecisionscombinedwiththedecreasedresourceandcapacityoftheCharityCommissiontoassistinindividualcases,meansthatincreasinglycharitytrusteesarehavingtorelyupontheirownjudgment.Theprocessofdecision-makinghascomeintosharperfocusandtheCharityCommissionhasrecentlylauncheditsnewGuidance,It’s Your Decision*,tohelpcharitytrusteeswiththeprocessofdecision-making.
Whenmakingsignificantorstrategicdecisionsitisimportanttoensurethattheyareproperlytaken.Thedecisionsdonottohavetoturnouttoberight–no-oneexpectstrusteestohaveacrystalball–butiftheyareproperlytakenthenthetrusteeswillusuallybeprotectedfrombeingcriticisedorpossiblyevensanctioned.
Attheoutsetcharitytrusteeshavetocheck:
• theyhavethepowertodowhattheyareproposingtodo(whichwillnormallymeancheckingyourcharity’sconstitutionandascertainingwhetherthereareanyparticularstatutoryrestrictionswhichapply);and
IBBSOLICITORSCHARITIESTEAMGooddecisionmaking
* http://goo.gl/yUCM9y
sUffICIentlY InforMeD?Trusteesshouldactproportionately.Sodependinguponarangeoffactorsincludingtheimportance,complexity,risk,cost,impactandurgency,thetrusteeswillneedtoensurethattheyhavegatheredtheevidenceandtakenappropriateadvice.Thatdoesnotmeanthattheyneedtoconsultprofessionalsoneveryissue,buttheyneedtobesurethattheyhaveunderstoodtheimplicationsandconsequencesoftheirdecisions.
What are relevant faCtors?Obviouslywhatfactorsarerelevantwilldependupontheparticularcircumstancesofeachcasebuttrusteesshouldconsiderwhether:
• thedecisionisinthecharity’sbestinterests;
• anyresultingactivitieswillfurtherthecharity’scharitablepurposes;
• thetrusteeshavehadregardtothepubicbenefitguidance(theyarerequiredbystatutetodoso);
• theyhavesufficientpower;
• theproposedcourseofactioncomplieswithalllaws–notonlycharitylawbutalso,forexample,equalityandbriberylegislation;
• anyalternativesmightbebetter;
• theyhavetakenproperadviceandwhethertheyneedspecialisthelp;
• therisksofproceedingandhowanyriskscanbemanaged;
• thedecisionmightimpactuponthecharity’sreputation;
• thetrusteeswillbeabletochangecourseifthedecisioniswrong.
What Is Irrelevant?Allowingpersonalprejudicetoplayapartinthedecision.Forexamplewhenchoosingtosellahousewhichbelongstothecharity,choosingtoacceptalowerpricefromayoungfamily,becauseyouprefertheideaofthepropertybeingusedandenjoyedinthatway.(However,ifinfactyoucontinuedtoownneighbouringlandthenchoosinggoodneighboursmayberelevant.)
ColleCtIve DeCIsIon MakIngDecisionsneedtobetakencollectively.Thetrusteesneedtoparticipateinthedecision,expresstheirviewsandonceadecisionismadestandbehindit.Atrusteewhodoesnotagreeisentitledtoexpressadissentingopinionandhaveitrecordedbutoncethedecisionismade,heorsheshouldnotunderminethedecisionthathasbeenmadebythetrustees.Ifatrusteewishestospeakoutagainstadecisionoftheboardheshouldgivesomethoughttoresigningfromtheboard.Eventhen,heorshewillneedtohaveregardtotheirdutiesofconfidentialitytothecharity.Anyindividualswhousuallytakepartintrusteemeetingsandarenotentitledtovoteonthisissueshouldnotbeincludedinanyvote.
the range of reasonable DeCIsIonsThecourtwillnotoverturnthedecisionofaboardoftrusteesunlessithasbrokenthelawinsomewayorisoutsidetherangeofreasonableness.
Decisionsaremorelikelytobereasonableifthetrustees:• havegivenenoughtimeandattention
tothematter;
• ensuretheyhaven’toverlookedanything;
• havegivensomethoughttowhethertheyoughttotakesoundingsfromstakeholders;
• areactingconsistently;
• stoodbackfromthedecisionandtriedtoviewitobjectivelyorimpartially.
DeCIsIon MakIng bY e-MaIlDependinguponthepowersinyourconstitution,youmaybeabletomakedecisiononthephone,bySkypeorbyemail.Whilstweunderstandthattheurgentnatureofsomemattersmaymaketheseotherformsdesirable,inourview,betterdecisionsaremadewhenthetrusteescanmeetinpersonandhaveenoughtimetoconsiderthefactsandaskappropriatequestions.
MInUtesFinally,onceadecisionistakenitshouldbeproperlyrecorded,toreducethelikelihoodofafuturechallengeandtoprovideevidencethatthedecisionwasproperlytakenandmadeonrelevantfacts,ifitischallenged.Ifanimproperlytakendecisionresultsinfinanciallosstothecharity,thecharitytrusteesmayfindthattheirdecisionisinvalidandinveryextremecasestrusteesmayfindthemselvesheldpersonallyliable.
IBBSOLICITORSCHARITIESTEAMGooddecisionmaking
If you or your Trustees would like to discuss the issues raised by this note and the potential issues in your charity, please contact:
JoColeman,Partner,[email protected]
THISBRIEFInGnOTEISOnLyInTEnDEDTOPROvIDEGEnERALGuIDAnCEAnDISnOTInTEnDEDTOCOnSTITuTELEGALADvICE.
©2013
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