Calls for new rules to regulate excessive executive pay in the charities sector

Rob Wilson, former minister for the charities sector has recently called for a Government review to consider implementing new regulations on executive pay.

On 1^st June 2021, the Daily Telegraph published claims that more than 270 UK-based charities pay their executive staff more than the Prime Minister’s £157,372 annual salary. According to the Telegraph, these charities pay a further 2,500 staff more than £100,000 each per year.

Although rough details about the salaries of charity employees are available on the Charity Commission website, Wilson has gone further and called for legislation requiring charities with annual incomes exceeding £500,000 to disclose detailed information about staff salaries on their websites and in their annual reports. This, he said, should help donors assess how salaries compare to a charity’s income received from donations.

Transparency and scrutiny should be encouraged, according to Wilson. Donors should be able to review not only the pay which is received by charity executives but also the process by which boards of trustees set salaries. In turn, this should allow boards of trustees to justify their pay decisions in a way that is accountable to their donors.

The Charity Commission has also responded to this news, with its chief executive, Helen Stephenson, saying that the Commission will not shy away from introducing more stringent requirements on pay transparency if required. She emphasised that “Being a charity is a privilege… all charities need to know that they ultimately answer to the public”.

The success of a charity is heavily influenced by its finances and public reputation. Excessive pay may not only have a negative impact on a charity’s finances directly, but reputational damage caused by perceived excessive pay and poor spending can result in the knock-on effect of reduced donations leading to further financial pressure.