We recently ran a set of seminars looking at governance points for the cultural sector. The backdrop to the seminars was the latest window for Creative Scotland Regular Funding applications. The sessions took account of the governance expectations of that application process, as well as a new Annual Return question posed by the Office of the Scottish Charity Regulator.
As we work with those in other sectors and segments, there are undoubtedly governance elements and thoughts that can be shared across sectors. Each sector has its own uniqueness, but whatever the aims and objectives are, they will be much more difficult to achieve without strong governance as a foundation.
Here's an overview of what was discussed at the recent seminars.
"the artistic visions of organisations are unlikely to be achieved in the absence of sound management and good governance" (Creative Scotland)
This is a good summary of this topic. Effective governance will have an important role in supporting artistic ambitions and allowing them to flourish. Poor governance will, on the other hand, allow poor leadership, management and organisation to undermine the cultural objectives and the reason the organisation exists in the first place. In other words, governance matters.
Legal structure... be a Jaffa Cake
The re-emergence of the classic 'cake or biscuit' Jaffa Cake conundrum on Radio 4's 'the Philosophers' Arms' proved to be an interesting talking point. The programme has not become a cooking show, but rather was using the Jaffa Cake as the basis for a discussion about definitions and the value (or non-value) of attempting to define something. Are there universal definitions? What does a definition tell us about the thing in question and the wider world? All heavy stuff!
For us, the Jaffa Cake discussion highlights the dangers of following supposed models, tags and definitions without challenge, without a healthy scepticism and, most importantly, without regard for what your own organisation is trying to be and achieve.
Why be a biscuit or a cake? Maybe you are a Jaffa Cake... something that is different and distinct.
The important point is that the legal vehicle, form of constitution and governance structure needs to suit your organisation. It should be appropriately distinct and act as the foundation for your organisation's artistic vision.
Informed choice of legal vehicle
We previously discussed the range of legal vehicles available for charities and third sector organisations. Creative Scotland sets out a list of the bodies from which it will accept a regular funding application. These are:-
- registered charities
- artist's groups (must be on a not-for-profit basis)
- limited by guarantee
- limited by shares (if asset locked)
- consortia (must have a written legal foundation
- ALEOs and local authorities
- Community Interest Companies
Whatever legal form is used by new organisations, or retained or newly adopted by existing organisations, it should be based on informed choice. Referring again to the Jaffa Cake situation, an established model might not be for you. Indeed, Creative Scotland anticipates that there will be many types of organisations that apply. After all, if we look at charities alone, Scotland has 23,500, so you would expect there to be some variety within that grouping.
On the topic of choice of legal form, a graph we discussed at the seminars provoked discussion:
The growth of social enterprise should also be considered. It is important to avoid prescriptively defining 'social enterprise'. Is also very important to recognise there is no such legal vehicle choice as social enterprise. Rather, social enterprise is about how and what the organisation is trying to achieve. 'Social enterprise' can be delivered by a range of legal vehicles, such as charities. It is worth noting that undertaking social enterprise does not automatically lead an organisation to use a Community Interest Company. It might be the right choice, but it may not be the most appropriate option.
"Governance, management and leadership"
We drilled down to some specific expectations of Creative Scotland, including "robust organisational management, withdiverse and appropriately experienced people in place", "appropriate controls" and "structures". The presence of the word "structures" is itself powerful; there must be some form to set out and support effective "governable, management and leadership".
This expectation leads us to think about issues such as:-
- clarity of roles and responsibilities
- project delivery
- financial management, reporting and oversight
- appropriate challenge and scrutiny
- the vital role of the chair of the organisation
- getting the skills and experience mix and getting the most out of the board
- board rotation; keeping it fresh without losing talent
In legal governance terms, some of these might be found in the constitution, some in policies and procedures and others in the conduct of team and board dealings.
In the session we looked at an OSCR case study and inquiry report to highlight what these governance issues can look like in practice.
Who are you?!
An apparently simple question raised in the process is the identification of "trustees" and "members" of the organisation. There is not always a simple answer. This is particularly the case for member organisations where failure to keep current and full records for members means there can be a misunderstanding as to whether or not there are any members at all, what powers they have and the nature of their role.
Often members will have very powerful rights (including removing and appointing trustees and changing the constitution). Organisations need to take control of these issues. It may seem that this is simply a record-keeping exercise, but in many contentious situations a failure to understand the power dynamic stemming from the rights and roles of trustees and members can put the future of an organisation in danger, or lead to what can only be described as a coup, with the associated negatives impacting on funders, reputation and (artistic and strategic) direction.
The Creative Scotland application permits bids by consortia and other collaborations. Collaborative working of any sort can bring tremendous opportunities, but the relationship must be set out in clear terms.
When choosing a partner or partners to collaborate with, it is important to identify those with the 'right' ethos, working culture, vision and objectives. Once a decision has been made, some due diligence should be undertaken to ascertain the 'fit'.
It is vital, and not just for funding applications, that the consortium is grounded in the right legal underpinnings; a contractual relationship or some form of special purpose vehicle designed for joint working. Whatever is used, it must clearly set out the rights and responsibilities of each party. The relationship must make clear who does what and what happens when certain events occur, including the end of the relationship (on good, bad or expected terms).
A final point: an OSCR question
The new version of the OSCR Annual Return asks an important question:-
"when did the charity trustees last look at and consider the content of the charity's governing document?"
As with the Creative Scotland process, the annual OSCR report highlights the importance of governance and constitutional matters in underpinning the success of a charity's activities and mission. Creative Scotland and OSCR are perhaps considering governance from different angles, but both are clear that strong governance supports an organisation in achieving its vision and objectives.