Environmental, social, governance (ESG) Accounting and reporting

The silver lining in the charity salary saga

Another week and more headlines about charity executive pay. Given the focus on bankers, business leaders, senior civil servants and local authority chiefs of late, it was really only a matter of time before charities would end up in the firing line.

And it’s no surprise it’s now, or that the story continues. August, holiday season for many, leaves plenty of empty column inches for the media to fill. But while it’s saddening to see our sector being dragged through the mud in this way, it also demonstrated the strength of public connection with the charity label and has been a timely wake up call for many of us as to the growing discord between the public’s opinion of what charity is and what we know to be reality.

Out there, old stereotypes prevail. The small community group, PTA, local youth forum or even local hospice all of whom conduct invaluable work, often on next to no publicity or staff budget, satisfy the public image of charity. These organisations don’t pay or need to pay large salaries, if at all, so why then, the logic seems to go, should those charities that are household names? This lumping together of the smallest of organisations with the sector’s goliaths, who may I stress are no less important in terms of the work they perform, is disquieting. The truth is that you can’t compare here. We’re talking apples and bicycles.

In their operations, many of the bigger charities are effectively large public benefit businesses, working on hugely complex issues at a national and international level, and delivering entire infrastructures of vital services locally. A connected local charity shop or branch or committee is a small cog, albeit it very vital one, in a system that enables these charities to fight for a better society and champion the needs of our most vulnerable. For other small charities, that vital mutual desire to achieve a better society aside, there are often more dissimilarities than similarities.

Although dismissed by some parts of the media as ‘airy gruff’, the argument that to manage an organisation of this size, seeking to deliver social change of the scale and ambition that many of our leading charities aim for, requires effective infrastructure, skills and talent is a valid one. Not that volunteers aren’t skilled and talented, but to run a £200m outfit is not something someone does after their day’s work, nor is something you pay someone £30k to do. To attract and retain the right management, with the right experience, pay has to be commensurate with the complexity, responsibility and risk the role entails – and what the market demands. Taking market value into account, a more fundamental issue here then is society’s concerns around the growing pay differential between those at the top and bottom of any organisation. But from the charity sector itself, it’s clear that there needs to be better, public explanation of what a modern large charity is, how it is resourced and how salaries are set and why. And when the perceptions don’t hold true, we need to be constructive in explaining the truth, and where necessary challenging statements that are fundamentally wrong. For me one of the most notable of these this past week was the assertion that in charities ‘the ruthless attention to cost control and efficiency is curiously absent’.

Yes, I agree that perhaps not every charity is as effective as it could be in keeping costs down – but then is this any different to the public and private sectors? Overall though, in our experience working with charities on the finance side, they are continually focussed on squeezing the most impact out of every pound. For example Oxfam – one of the unfortunate ‘named and shamed’ charities with a turnover close to £400m – stripped out £3m of support costs last year alone through efficiency savings. This is to be commended, and they are far from the only organisation to do so.

The irony here shouldn’t be lost either. It’s highly qualified finance professionals, such as our members, that are just the sort of individuals that large charities of this size and scale need to be employing to ensure a focus on cost control and efficiency continues. Their salaries, considerably less than what they could earn elsewhere, are not about people feathering their own nest, but about delivering maximum value to beneficiaries with donors’ money.

All this said, it doesn’t mean charities can afford to be reckless in pursuit of talent, seek justification for excessive pay where there is none to be found or get carried away on ever inflating salaries. There is a limit. As charities, we spend money given to us on trust, to serve beneficiaries, and this must always be borne in mind by trustees when agreeing the organisation’s salary structure. Furthermore, the public’s scrutiny of how we spend our money should be welcomed and seized as an opportunity to improve. And on the issue of understanding the make-up of the modern charity sector, we should not shy away but embrace this as a chance to address public expectations, and find ways to explain more clearly what exactly it takes for charities to deliver the impact donors, supporters and beneficiaries expect. The silver lining here could well end up being a more open, transparent and better understood charity sector.

This post was last reviewed on 6 August 2018 at 15:40
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