Earlier this year, The Times reported that the RSPCA had paid a significant sum to its former interim chief executive on termination of his employment following allegations that he was turned down for the role of permanent chief executive because of his age. This prompted the Charity Commission to examine the trustees' decision-making in relation to the termination payment.
After investigation, the Charity Commission concluded that the RSPCA's Chairman, Vice-Chairman, Treasurer and Deputy Treasurer had failed to:
- comply with their duty to ensure that they were sufficiently informed before making a decision about the settlement to the interim chief executive; and
- act with reasonable care and skill in relation to the negotiations with him
The Commission issued the RSPCA with an official warning, which includes a recommendation that the charity's trustees receive formal training to ensure they are fully aware of their responsibilities.
If the breaches specified in an official warning are not rectified, the Charity Commission can take more serious regulatory action such as suspending trustees or appointing an interim manager of the charity.
Lessons for other charities
The Charity Commission has not published full details of its investigation in the RSPCA case, but comments made in the accompanying publication of the official warning provide some indication of what led the commission to issue the warning.
- Size of the settlement payment – The Times reported that the settlement sum paid out by the RSPCA was "understood to be far bigger" than the interim chief executive's £150,000 annual salary. Although the Commission does not give specific figures, it does criticise the trustees' lack of oversight "given the large sum of money involved". Clearly, the larger the sums involved, the more trustees will be expected to scrutinise and approve a settlement proposal in advance of any offer being made.
- Supervising negotiations – the Charity Commission also criticises the trustees' lack of care and skill during the settlement negotiations. We do not know precisely what led the Commission to draw this conclusion, but the finding does indicate that it may not be enough for trustees to simply approve a financial figure and then step away from the settlement process. While trustees will not necessarily be expected to carry out negotiations personally, it stands to reason that they should be kept abreast of any material developments, for example, a decision to offer significant additional benefits, to make potentially high-profile public announcements, and/or to make concessions regarding liability.
The Charity Commission rarely issues official warnings and it is worth noting that the warning in this case was given in the context of wider concerns about the RSPCA's governance and management. There are many situations in which a charity might legitimately decide to make a financial pay-out to an employee on termination of employment, however, the commission's warning does provide a timely reminder to all charities of the importance for trustees to have full oversight of settlement decisions, particularly in cases involving large sums of money and/or concerning a senior member of staff.
Trustees need to ensure that they understand their duties and obligations and that they comply with relevant Charity Commission guidance, including . Trustees also need to think about potential reputational issues for the charity and, depending on the circumstances, may need to plan how the departure of the member of staff will be announced to the press and public.
We provide trustee training to charities on Charity Commission requirements and risk-management issues. We also regularly advise clients on termination of senior members of staff and assist with settlement negotiations. If you have any concerns or questions, get in touch with our charity law team - [email protected].