Those of us who hold senior roles in Sport were recently invited to contribute to a survey to inform the drafting of the new Sport England Code of Sports Governance. Sport is the third industry in which I am involved to have a Governance Code, the others being charities and general companies. I have seen the impact they have had on my roles, in particular, as a Company Secretary, CEO and Chair.
Contributing to this consultation with Sport England got me thinking about the role that a Governance Code plays in industry, the beneficial effect that it has had; but also the distortion of debate that flows from it on the important issues of diversity and inclusion.
History of Governance Codes
The very first Code was the UK Corporate Governance Code, the first version of which was published in 1992 by the Cadbury Committee. It defined corporate governance as ‘the system by which companies are directed and controlled”.
Building on the Corporate Governance Code, the Labour Governments of Tony Blair and Gordon Brown were keen to address what they saw as a need for much improved governance in Sports Governing Bodies. They encouraged the drafting of the very first Code of Sport Governance, and began to link continued receipt of public funding by Governing Bodies to implementation of the Code.
Sports Governance Code
The first versions of the Code introduced much needed changes, such as introducing Independent Directors, setting maximum term limits for Directors, empowering decision making by Boards of Directors, broadening representation on Governing Councils, addressing conflicts of interest, and encouraging gender diversity in governing structures.
For sports that were not so dependent on public funding, like Football and Rugby Union, the Government still managed to exert pressure to persuade the Governing Bodies to adopt the Sports Governance Code’s main provisions. The Lord Burns Report of 2005 led to the FA introducing a range of governance changes, including an Independent Chair, and the Slaughter & May Report in 2014 was followed by an RFU review process which introduced changes to the way that the RFU is governed.
The first versions of the Code undoubtedly brought huge improvements to the way that sports are run. Although it is fair to say that, even now, not every sport is at the same level of compliance with the Code of Sports Governance.
The most recent version, in 2016, introduced yet more welcome changes. But the debate, at the time of its introduction, was most noisily about the establishment of targets for gender diversity, with the requirement for 30% of the composition of a Board to be gender diverse.
There were many important other changes introduced, but the issue of gender diversity attracted most of the attention and tended to be the issue most focussed upon by Boards as they began the implementation of the Code.
Introducing Codes for Charities
Meanwhile, the Cadbury Principles of the UK Corporate Governance Code were being introduced to charities much more slowly.
The first two versions of the Charity Governance Code were slow to attract widespread compliance from charities.
It was not until the third version of the Code that take up really accelerated. The third version of the Charity Governance Code was published in June 2017, and has been endorsed by the Charity Commission, giving it instantly better credibility.
With a renewed sector focus on good governance, the Charity Governance Code has had a much better take-up amongst charities. The Charity Governance Code is voluntary. Its recommended practices are recommendations of best practice only and are not mandatory. It sets out to be aspirational and acknowledges that many charities will not want to or be able to comply in full. However, for charities that aspire to be outstanding in their field, the guidance of the Charity Governance Code is helpful. This Code is designed as a tool to support continuous improvement. Indeed, where the Charity Commission mandates a charity to undertake a governance review, a step that they are taking much more often, the advisers conducting the review for a Charity will usually recommend that the charity adopts as much as possible of the Charity Governance Code.
Principles of the Charity Governance Code
There are seven key principles in the Code.
- Organisational purpose
- Decision making, risk and control
- Board effectiveness
- Openness and accountability.
One of the key recommendations, and accepted best practice, is that the Trustees of a charity are responsible for the charity. You would be surprised how often this principle needs to be restated, due to the structures in charities.
The voluntary nature of the Charity Governance Code has meant that it is slower to be adopted than other codes. It also has less of a focus on issues of diversity, equality and inclusion on Trustee Boards than the other codes. This is no surprise, as many charities are, of their very nature, single issue with a specific remit on issues relating gender, race, religion, ability, identity, and so on. Diversity and inclusion in Boards of Trustees is therefore less of a focus, although the Equalities Act requires great care to be taken on the implementation of charitable activities for such single issue charities.
A New Sports Governance Code
Elsewhere, though, Sport England has begun to consult on their new Sport Governance Code. There are many corporate issues which undoubtedly still require attention, such as ensuring that independent directors, conflicts of interest policies, and term limits apply at the levels below Governing Bodies, such as Leagues and Regional Associations.
But, media and public attention will invariably focus most on how the Code chooses to address the very topical issues of diversity and inclusion, especially ethnicity. There currently is a mandated proportion of a Board that must be gender diverse. Doubtless great attention will be given to, and debate centred around, how the new Code proposes to address ethnic diversity. Will it create a new target for ethnicity on a Board? Will it instead combine targets for diversity and inclusion? How far down the pyramid of an organisation will any such targets apply?
These seemed to represent the larger part of the questions asked in the Consultation, which suggests that it is the area causing the most debate in the drawing up of the Code.
When the new Sports Governance Code is published, I am sure that any new targets on diversity and inclusion will attract all the headlines and the attention.
It shows that external Governance codes are having an increasing impact on the running of sports and charities. How you comply with those Codes will go a long way towards the perception by funders, donors and stakeholders of the values and professionalism of your organisation.