There is a way to pay board members.
An issue is polarising opinion between members of the National Housing Federation like no other.

It is, of course, the thorny question of whether board members of housing associations should be paid.

There are some things that we should be able to agree about. First, if individual housing associations do not wish to pay their board members, they should not be obliged to. Second, even if associations pay their board members, there may be persons who do not wish to be paid and that, of course, should also be acceptable.

The power to pay board members already exists – it was given by the Housing Act 1996. But then the Housing Corporation imposed a maximum limit of £50 a year for payment to any individual member. I am in favour of allowing payments to board members that are in line with similar kinds of activity, for example membership of a Housing Action Trust.

The arguments in favour of payment, and against, are well known. I prefer to look at a way in which a system for modest payments could be introduced. My proposal could be paraphrased as "£1 per thousand for good governance", and would work like this:

  • A housing association's external auditors (as part of the annual accounts process) would certify a figure for turnover for the last financial year.

  • Associations should then be able to spend a maximum of 0.1% of the previous year's turnover (in total) on remunerating board members in the current financial year. This should be the limit set by the Housing Corporation.

  • Housing associations could then frame their own proposals within that overall limit to take account of, for example, the number of regional committees or the extra responsibilities of the chair.

    Under this scheme, a housing association with a turnover of £30m in 2001/02 would be able to spend a maximum of £30,000 on remunerating its board members in the year 2002/03. If the association had 15 board members, it could pay them £2000 each, or alternatively give slightly more to the chair and reduce the "basic" payment.

    This solution would avoid the Housing Corporation having to make complicated rules for different forms of board and governance structure for different types of association; and it would take account of increased activity and inflation each year.

    Turnover is not a perfect measure but it is at least verifiable. The greater the turnover, usually the more complex the tasks and the more onerous the responsibilities of non-executive board members.

    It has been put to me that my proposal is too "open-ended" for the Housing Corporation to accept within its fairly tight regulatory regime. To make it more precise, I would suggest methods borrowed from private finance – that is for the corporation to also specify a "cap" and a "collar".

    The "cap" could be a maximum of £100,000 payments for board members in any one year. This would only impact upon those few associations with a turnover in excess of £100m. The "collar" could be the existing Housing Corporation limit of £50 per board member a year. If these proposals were adopted, we would see modest stipends for non-executive board members, to reflect the increasing demands of governance placed upon them by regulation and by the increasing scrutiny of corporate governance in all sectors of the economy.

    My suggestion will not persuade those who are opposed to any kind of payment. But it seems fair and reasonable and I cannot believe that external stakeholders would object to the expenditure of £1 per thousand in pursuit of good governance.

    • Source

    Housing Today

    Postscript

    Mike Morris is chief executive of the William Sutton Trust