Third Sector: Sector broadly welcomes pay inquiry

The inquiry into senior pay by the National Council for Voluntary Organisations, led by NCVO chair Martyn Lewis, will recommend that charities should publish the pay details of their highest-paid staff prominently on their websites

Charities should publish the pay details of their highest-paid staff prominently on their websites, the inquiry into senior pay by the National Council for Voluntary Organisations will recommend.

The inquiry, which was set up by the NCVO after articles in The Daily Telegraph and the Daily Mail newspapers criticised the salaries of chief executives from the Disasters Emergency Committee group of charities, will publish its report tomorrow.

It will say that all charities with paid staff should consider publishing the salary of their highest paid employees, and those with a gross income of more than £500,000 a year should always adopt this policy.

Along with the names of the highest paid and their job titles, the inquiry will recommend that charities should publish a statement from trustees, which justifies pay levels and explains how they help to deliver the charity’s objectives.

The inquiry panel, led by Martyn Lewis, chair of the NCVO, will say all of this information should be available within two clicks from a charity’s homepage, rather than buried in lengthy annual reports, referred to by Lewis as “two clicks to clarity”.

The panel that carried out the inquiry consisted of senior sector figures including Lord Allen of Kensington, the outgoing chairman of the British Red Cross, the charity lawyer Lord Phillips of Sudbury, and Ian Theodoreson, chair of the Charity Finance Group. The panel will say that charities with an annual income above £500,000 should consider using remuneration ratios based on a multiple between the highest pay to median pay in an organisation.

Charities below this threshold should also be encouraged to adopt a similar policy, and report on the salary of their chief executives.

The point of increased transparency over executive pay, the report will say, is to give donors the power to scrutinise charities that they are considering supporting.

It would also put pressure on trustees to say publicly how pay decisions match their legal requirement to prioritise the best interests of the charity and its beneficiaries.

Adopting its proposals, the report will say, would help “improve public understanding and confidence in charities”.

The report will highlight that 91 per cent of all registered charities have no paid staff and are run by volunteers, that the remaining 9 per cent employ 800,000 people and that less than 1 per cent employ a member of staff earning £60,000 or more.

The inquiry will also say that senior staff in charities earn “substantially less” – between 25 and 45 per cent – than their counterparts in the public or private sectors.

Lewis said that the charity sector should take this opportunity to explain its work to the public to prove that it believed in being open with donors.

“Many of the charities the British public are proudest of are major operations employing thousands of people and managing tens or even hundreds of millions of pounds,” he said.

“They need highly skilled professionals in order to run to the highest standard possible and make the best use of our donations. But we believe that where they feel they need to pay high salaries in order to recruit the right people, they should be clear in explaining this to donors.”

The recommendations have the support of the Charity Commission, which took part in the inquiry as an observer.

“We encourage charities to be as open as they can about this issue, which we know matters to the public,” a spokeswoman for the regulator said.

They were also broadly welcomed elsewhere in the charity world.

“Maintaining public trust demands all charities to be transparent about pay and be able to justify their decisions,” said Neil Cleeveley, director of policy and research at Navca. “The most interesting idea is remuneration ratios because low pay is a more important issue than the earnings of a handful of chief executives.”

A spokeswoman for the charity chief executives body Acevo said it was important that charities and social enterprises continued to debate the important issue of executive pay.

“The charity sector is incredibly diverse and no one policy on pay and transparency will apply to every charity; charity boards must constantly evaluate their policies in light of the principles,” she said. “The key principle is value for money and demonstrating what we achieve for our supporters and how we help our beneficiaries alongside what we spend.”

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