Over the past few decades, the charity sector has experienced a greater level of competitiveness, more funding and the opportunity to be more daring than ever before. Recent news relating to Oxfam and Save the Children has brought about an opportunity for charities to truly re-examine themselves and their approach to ethics. CEOs, General Counsel or other leaders are likely to be looking at the fallout from these industry events and wondering how to respond. Should they be acting as agents for change and if so, how?
The best place to start is by looking at a compliance programme. Is one in place and what is the added value in having one? The best way to answer this is to address the commons reasons why a charitable business might be lacking in one:
It’s not a good use of donated funds
This is an understandable line of thinking, but it misunderstands the relationship between a donor and a charity. Those who give money to a charitable cause should perhaps be treated more like a company would treat its shareholders. You want them to have confidence that you are a well-run organisation, with clear standards that are expected of your people and your supply chain and that if someone breaches those standards, they will be brought to account and may be removed from the organisation. People understand that it takes time, money and organisation to run a charity. Provided that the costs of doing so are not excessive, they are unlikely to be put off giving to your charity for this reason alone. The best way to demonstrate good governance is through a properly structured and measurable compliance programme. It demonstrates that you operate transparently and that the rules are working in your charity, because you can produce reports and metrics at the touch of a button. These metrics give stakeholders confidence that things are being run ethically, properly and in line with the mission statement.
We are staffed by good people who wouldn’t behave unethically or unlawfully
You may be entitled to assume that everyone in your charity is on board with your mission statement, be that finding a cure for cancer, relieving hunger around the world, or whatever the cause. However, as has been shown by recent events, you are not entitled to presume that this makes everyone in your organisation a 100% “good” person. People who work for charities are human beings, not angels. They are subject to the same pressures, worries and temptations as any of us. They can still be bullies or sexual predators in the workplace; the two characteristics are not, unfortunately, mutually exclusive. And while a compliance programme won’t prevent those people from entering your organisation, it should weed them out and allow you to deal with them quickly, fairly and transparently. As a result, you will protect your brand and even build confidence in it if you are seen to be doing the right thing in a timely manner.
A new reason to consider implementing a compliance programme
And then there’s the issue of risk. Recent changes in the law, including the Bribery Act and Criminal Finances Act, have included provisions which create “failure to prevent” offences for organisations. And it’s unlikely to stop there. I suspect that “failure to prevent fraud” is not far from the statute books too. And the focus of these offences is on organisations, not just companies; charities are exposed, too.
A statutory defence is afforded to those offences if the relative organisation has “adequate” or “reasonable” processes and measures in place, designed to prevent wrongdoing. The best way to demonstrate such adequate or reasonable processes is to have in place an appropriately tailored, risk-assessed compliance programme.