The debate about paying board members needs a different starting point, argues Joy Kent.
With housing associations in Wales about to be given the right to choose whether to pay board members, I was commissioned to do some work for Melin Homes to inform its board discussion with information on experiences from across the UK, other sectors and other parts of the world.
Delving into this subject was fascinating and showed that the housing sector in Wales is not alone in considering this issue as part of a much broader debate about whether some features of traditional governance structures are now fit for purpose.
Board member remuneration has been a contentious issue within the housing sector in Wales for over a decade. Twice before – in 2003 and 2014 – we have had consultations and the relevant minister has chosen not to offer the option, partly due to there being no clear consensus within the sector itself.
In the most recent consultation, a small majority of 59 per cent of respondents were in favour and the Welsh Assembly’s Public Accounts Committee agreed, recommending that ‘Welsh Government give considerations to enabling housing associations to determine whether they pay their board members or not…’
The change appears to be the result of:
- an acknowledgement of the greater emphasis by the regulator on robust governance, and consequently increased demands on board members’ time and input
- the recognition of the increasingly complex and challenging external environment
- the need to recruit and retain the right mix of skills and expertise around the board table to meet this challenge.
English associations have been able to remunerate board members since 2002 and Scottish ones since 2010 but their responses have been very different. The Scottish regulator told me ‘only a handful’ of the larger associations choose to pay board members and a discussion with a chief executive backed this up, suggesting a combination of history and the current context as explanation.
The vast majority of associations in Scotland are small, community-based with a strong history of community activism and volunteering; and although the regulator is putting more emphasis on governance and the sector is mindful of the pressures this puts on volunteer boards, the Scottish government has mitigated the impact of UK benefit reforms and is investing in development. Essentially, the sector doesn’t feel it is facing the same kind of pressures that are evident in other parts of the UK so there isn’t an appetite or need to change.
In England remuneration has been actively taken forward, particularly by the larger, more complex associations. Grant Thornton’s report analysed governance arrangements in the largest 60 associations in 2015. The most common reasons for choosing to remunerate were the pursuit of:
- Improved recruitment (90.1%)
- Sustained good governance (82%)
- Improved retention (54%)
- Improved performance (54%)
- Responding to market (47%)
- Improved attendance (28%)
- Refocussing the board (26%).
Of those who had chosen not to remunerate:
- Over 75% felt it undermined the voluntary ethos
- Nearly half felt it could damage public perception of the organisation
- 40% felt resources would be better spent on services
- Just over 30% were concerned about negative feedback from tenants/residents
- Just over 18% suggested it would attract board members ‘who are in it for the money’
- 15% argued it would undermine the clear boundary between the board and executive.
The motives on both sides appear to be underpinned by a set of beliefs; those in favour think payment will attract and keep better and more engaged board members leading to an improvement in board performance (sometimes considered as taking a more private sector approach); and those against are concerned about what might happen to the ethos of the organisation and how it is perceived if they move away from the history of the sector’s voluntary board.
From my reading, I would suggest that there is currently little evidence to support either position. There is evidence from the psychology field that performance can be undermined by linking it to financial reward, but I doubt we would argue that the staff of a housing association, or any other not-for-profit organisation, aren’t committed to the organisation because they are paid – so it is interesting that some take a different view for board members. Research also suggests that a sense of fairness is hugely important to us and I wonder whether this is at the centre of the two opposing arguments although largely not articulated as such?
On the one side, is it fair to use resources to pay board members when they could be better used for service delivery? On the other, how fair is it to expect so much from board members when they are volunteers?
In my experience on both sides of the board table, where board members are gifting their time, skills and expertise, executive teams often feel uncomfortable asking for the level of engagement necessary today to fulfil demanding governance requirements. Outside the housing sector I have heard board members question processes and demands such as board evaluation or additional responsibilities with sub-committees etc. when they are ‘just volunteers’.
Perhaps the beliefs shaping how we approach this question are unhelpful. I would suggest a different starting point that is not influenced by historical debates or mimicking the private sector. What housing and other not-for-profit organisations need now and in the future may be very different to what has worked for them in the past.
In my opinion, the key question and starting point should be how organisations are going to be successful in the current and future context and what governance arrangements need to be in place to help achieve that success. The answer to this question may well involve remunerating board members but it may also be establishing different governance arrangements entirely.
A word of warning though: organisations that ignore the research on human motivation are likely to suffer for it. Whatever is put in place, the people involved need to feel it’s fair.
Joy Kent is the founding director of Joy Unlimited – a consultancy working with individuals and organisations to achieve success by harnessing their positivity. For further information contact joy@joy-unlimited.co.uk