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Chartered Secretaries Australia's sister organisation in Britain, the Institute of Chartered Secretaries and Administrators (ICSA), has recently released a draft code of Principles of Good Governance for Charities. (1) Given the increasing interest in governance in the non-profit sector, this article provides a background to the draft code and analyses what is proposed.
Before introducing the code, an explanation of terminology is needed. In Britain, the term 'charity' is used, when in Australia terms such as 'community-based organisation' or 'non-profit' would be used instead. Also, the British tend to use the word 'trustee' when Australians would use terms such as 'director', 'board member' or 'committee member'.
Background to the code
The aim of the ICSA document is to provide clear guidance on what constitutes good governance in the charitable sector. Whereas in Australia there are 19 000 registered charities, Britain has over 180 000. Charities are those organisations concerned with the relief of poverty, the advancement of education, the advancement of religion and other purposes beneficial to the community.
The proposed code is based on a three-tiered structure of 'underpinning principles' (see the table on the following page), 'supporting principles' and 'practical steps'. Similarly to the ASX Corporate Governance Council's Principles of Good Corporate Governance and Best Practice Recommendations, the code proposes a 'comply or explain' approach: where trustees consider the proposed principles are not appropriate for their organisation, they should explain to stakeholders why this is the case. Thus the approach combines both rigour and flexibility.
The code suggests the charitable sector can learn from the governance experiences of the private sector. The draft notes 'Whether the board is driven by the bottom line or by a deep-rooted ethical mission, some things remain …