March 2021 edition: Re-coding Governance

Re-coding Governance

It is often said that good governance is essential to a successful organisation. Consequently, governments, regulators, policy-makers and influencers have developed codes of governance, standards and regulatory requirements to raise the quality and effectiveness of governance in each sector of the economy.

The UK has generally adopted a principles-based approach to good governance, eschewing the rules-based approach adopted by some countries.The Financial Aspects of Corporate Governance, the report produced by Sir Adrian Cadbury’s review in 1992, detailed systems to mitigate corporate governance risks and failures. The review was commissioned as a result of several high-profile corporate failures (BCCI, the Mirror Group Pension Fund, Polly Peck) and it has laid the foundations for a proliferation of governance standards, at home and abroad, for almost 30 years. Consequently, the benefits of good governance tend to be framed in the context of preventing scandals, abuse or mismanagement. However, that approach denies a voice to promoting the inherent benefits of good governance - ultimately delivering an organisation’s purpose in an effective, compliant and ethical manner.

ICSA: The Chartered Governance Institute (the Institute) developed a virtuous circle of good charity governance theory in 2020 and recognised that a key aspect of delivering good governance is the application of soft and hard governance drivers, one of the latter being the adoption of relevant governance standards or codes.

The Charity Governance Code (the Code) has been around since 2005, detailing governance principles and good practice specific to the sector. However, a public consultation informing the recent iteration of the Code highlighted some significant aspects where the recommendations did not accurately reflect the governance needs of the academy Trust sector. Additionally, individuals have urged the academy Trust sector and the Charity Governance Code Steering Group to develop a code specifically for academy Trusts.

Given that the DfE produces the regularly updated Governance Handbook and the Financial Accounting Handbook, the question has to be asked as to why there might be a need for a sector-specific code. While the DfE’s guidance provides detailed requirements about the way academy Trusts should be run, including via funding agreements, the quality of governance remains inconsistent. The range of size and complexity of academy Trusts can also make it challenging for Trustees to know what governance arrangements – beyond what is mandated or strongly encouraged – to put in place to support the achievement of the charitable purposes: high-quality education provided in a safe environment and delivering public benefit. A governance code can help improve the quality and practice of governance by:

  • Establishing clear principles of good governance and recommended practice for academy Trust boards to augment existing, and future, DfE guidance;
  • Providing the DfE, stakeholders and the wider public with confidence in the work of academy Trusts;

  • Being a benchmark by which stakeholders can hold individual academy Trusts to account, via public adherence and reporting on a voluntary basis;

  • Demonstrating transparency and accountability;

  • Providing assurance that charitable and public resources and assets are protected and used for the purposes intended;

  • Offering a framework which helps charity trustees focus on the academy Trust’s charitable achievement;

  • Generating evidence to help rebut any sector-wide challenges to its reputation; and

  • Recognising that a code can act as a valuable proxy for public confidence in the integrity of the academy Trust’s, and wider sector’s work.

Ultimately, a sector specific code will increase charity Trustee awareness of the importance of good governance in the successful delivery of their charitable purposes and help them understand what good governance looks like. It will also enable academy Trust boards to implement the highest standards of governance that are proportionate and effective for their academy Trust, throughout its evolution.

The range of size and complexity of academy Trusts can also make it challenging for trustees to know what governance arrangements – beyond what is mandated or strongly encouraged – to put in place to support the achievement of the charitable purposes.

Louise Thomson

With identifiable standards and recommended practice for academy Trust boards to consider and implement, there should be identifiable benefits in the form of:

  • Increased reporting of good governance in schools by Ofsted, the Regional Schools Commissioners and the Education and Skills Funding Agency (ESFA);

  • Improved quality of reporting (annual reports and statutory returns to ESFA) showing that academy Trusts positively sign up to the Code voluntarily, in increasing numbers;

  • Stronger narrative reporting about how the board works and its impact on the effectiveness of the academy Trust;

  • Enhanced governance literacy and maturity by academy Trust boards as evidenced by discussions about future developments (expansion and re-brokerage);

  • Better understanding of the governance arrangements in schools by members, staff, pupils, parents, local governors and the wider public, with a visible improvement in relations between key stakeholders; and

  • Less potential for the media to attribute everything that goes wrong at an academy Trust to poor governance.

For an Institute with a long history and pedigree in creating and contributing to governance codes in different sectors and countries, the benefits of developing a code to address the needs of academy Trusts are obvious. With CST, we will be exploring just how such a code could be developed.