Six months from now, housing association board members across the country could be pocketing their first pay cheques. After years of debate, the release of a Housing Corporation consultation paper last month, outlining proposals to pay board members up to £20,000 each, means what was once a radical proposal is now a practical reality.
Moat Housing Association chief executive John Barker recently described the continued governance of registered social landlords by boards of volunteers as having the "potential to be a recipe for disaster for the sector." Yet Lady Joyce Montgomery, Harvest Housing Group chair, is just as vehement in her support for the "voluntary ethos" of retaining unpaid board members. She predicts the issue will "split the movement from top to bottom", and adds that Harvest's 60 board members show scant enthusiasm for payment.
We've all heard these arguments in one form or another and the debate over the payment of local government councillors echoes them (see box, page 24). They can be summarised like this: the sense of civic duty will be sacrificed through payment but new blood is urgently required in most associations, and, as the majority of board members are either retired or unemployed, in the end, it all boils down to one basic dilemma – money.
Large charitable trusts such as Peabody and Guinness say they have no need to pay their boards as their prestige affords them ample candidates. Peabody, for instance, counts among its board members American ambassador William Farish and Dudley Fishburn, chairman of HFC Bank. The corporation's consultation paper asked smaller associations how they could improve their governance without stretching their finances to the point where the corporation might have to step in. Next Wednesday's London Housing Federation debate on the subject is set to be a passionate affair.
Derek Joseph, executive director at consultant Hacas Chapman Hendy, says there are two questions for such RSLs to address when responding to the paper: "The first is whether or not to pay board members and the second is how much to add for work above being an ordinary board member – for example the chair or treasurer."
Joseph says that there should be an independent assessment of the board, examining issues such as the sort of skills that are missing from the mix of people. The result of this should be a clear picture of what is wanted from each board member, which should form a contract providing a job description, and also cost the process in terms of time and responsibility.
There will have to be a remuneration committe, he says: "If you're going to pay people there's got to be a requirement to perform. The job description is the key. Read the papers; attend board meetings; take part in discussions. There will be other targets apart from financial – for example, putting in place plans to achieve targets following a stock condition survey, tenant satisfaction and performance under inspection."
Appraisal in practice
RSL Places for People already has a system of board member appraisal. The system – called the board health check – collects people's opinions about how the board is working and then feeds back through an annual improvement programme. The Anchor Trust has also been using an appraisal system since 1999 and would continue to use this should it start paying its members. The chairman, chief executive and deputy chief executive of the RSL, which has 35,000 properties, 10,500 staff and an annual turnover of £200m, assess board members' performance in three main areas: skills and knowledge; personal qualities and ways of working. The key areas within these are "the ability to assess the financial performance of the business, accounting skills and the willingness to be subject to annual appraisal", according to a spokesman. The information is used to decide how much board members should be paid, but he stresses that it is "not as straightforward as performance-related pay, as board members are also assessed in terms of the responsibilities they take on".
Performance-related pay is a controversial issue. Hacas Chapman Hendy's Derek Joseph says: "I would prefer to see performance-related pay, as essentially you want board members to be successful." This would have to be based on the performance of the board as a whole, rather than on an individual basis, he says: "The only time individuals should be assessed is when they have a particular responsibility." But Peter Malpas, housing policy professor at the University of West England, says: "It would be incredibly divisive to pay some board members more than others. It would be very difficult to implement. Given the opposition of most board members to being paid, a flat rate would make much more sense. If you pay people you then have a strong case for introducing board member appraisal on an annual basis, but not linked to pay."
Malpas, who previously sat on the board of Somerset-based Knightstone Housing Association as a deputy chair, feels that if the payment of a board results in new blood coming into the organisation, then it may well be a good thing. He also has concerns that "the taint of charity and condescension of the upper classes [who tend to populate boards] is a bad thing for the sector" and hopes that if payment is introduced, it will engender a more businesslike attitude.
The bottom line
A key passage in the Housing Corporation's consultation paper refers to the need for associations to prove that paying board members actually improves governance without adversely affecting its ability to deliver tenant services. Malpas calculates that the cost of paying boards could be as high as £100,000 for some associations – a significant factor on the balance sheet.
As rent restructuring generally means associations can't increase rents, cutting back on tenants services is an inevitable consequence of payment, he says: "As a result, you might find that only those associations with more than 10,000 units actually do it and the vast majority refuse."
John Castelberg, chief executive of Kingston-upon-Thames Churches Housing Association, agrees. He says that his preference, if pushed, would be to rule out paying board members, because "we can't pay substantial sums of money". However, he does admit: "If you beamed down from planet Zog, you would think it strange that housing association staff get so much money, while boards hardly get a penny."
Castelberg's is a relatively small association, with around 250 units under management – exactly the type of RSL the corporation hope payment will help. Castelberg says: "Board recruitment is a big issue for us. We need some younger and more professional blood, but even if we did pay board members, it would widen the gap even further between smaller and larger associations in terms of the quality of people we could attract. All those interested would tend towards bigger and better-known bodies like Places for People and Home.
"I would prefer something more in the way of an attendance allowance, paid to people's employers rather than to individuals directly. If we took a decision to pay, we would probably pay the chair and the treasurer, rather than all the board members. We couldn't justify paying anything like the six-figure sums being talked about elsewhere."
So, do the larger players agree? Housing heavyweights don't get much bigger than Places for People, which turns over £185m a year and has roughly 45,000 properties. Chief executive David Cowans is right behind the idea of paying board members: "My view is that we're in a very broad church and there is lots of scope for retaining the voluntary ethic," he says. "But you need people who are able to advise, not just those with lots of time on their hands. It's part of the sector maturing. Where it's appropriate and results in stronger governance, it is entirely sensible and reasonable."
NHF guidance
The National Housing Federation has reservations about the payment of board members, but feels that if it must be done, it has to achieve a large change in the performance of boards and standards of governance. To this end, it plans to produce a guidebook to coincide with the publication of the results of the corporation's consultation – which closes in February next year.
NHF deputy chief executive James Tickell says: "There is a large problem for any board that decides to pay its members, but there are some who choose not to claim it – for example if they are on housing or income support." He adds that the Inland Revenue could also come into play, as in some cases it will view the opportunity to accept payment as though a person has accepted that payment, whether they actually have or not.
Tickell also points out that the Charity Commission has joint regulatory responsibility for around 200 associations and that any which wished to pay their board members would have to submit proposals to the commission. In September 2000 the commission issued the results of a 12-month consultation process which concluded that it would be permissible under some circumstances for charities to pay their trustees. Anchor Trust chief executive John Belcher has already said he will "seriously consider" presenting a case for paying its board to the commission as soon as possible.
Kingston-upon-Thames Churches' John Castelberg sums up the dilemma. He points out that the 150 delegates at last week's NHF conference for smaller housing associations concluded that "the most important thing is that [payment] runs contrary to the voluntary ethos", but adds: "I am aware of the arguments against, but I can equally see a business case where payment can attract board members of all shapes and sizes."
Smaller associations may wish to preserve the voluntary ethos, but they may have no choice if they are to recruit new, young, economically active board members.
Graham Horton: Tenant board member, Gallions Housing Association
Horace Plummer: Board member, Beaver Housing Association
Rev Robin Martin: Chair, Riverside Midlands
John Farrant: Chair, William Sutton Housing Alliance Trust
Chris Calder: Vice-chair, Housing for Women
The decision to pay councillors
Any move to pay board members would echo the changes that took place in January 2002, whereby local councillors were able to draw an allowance for their services. That decision followed the 1999 Association of London Government report Making Allowances, which responded to the prime minister’s agenda of modernising local government. The report recommended London councils change the way they compensate their councillors, and recommended a basic annual allowance of £8500 for councillors in London. The idea was that the allowance would enhance the status of councillors and encourage a new generation of citizens to stand for election. Several councils have already started paying their board memebrs an allowance, and the move is helping to bring a more diverse range of people into the role. Hillingdon councillor David Bishop, who’s ward is Northwood Hills, believes extra money is a good thing. He says: “I think the move will lead to renewed interest in local politics and will be an incentive for people to consider becoming councillors.” However Katia David, a Conservative councillor in Barnet, north London, has mixed feelings about it. She says: “While there is a lot of work that goes into being a councillor, the fact is that people never used to expect to be paid. My concern is that the wrong calibre of people – who are motivated by the money – may be attracted to councils.”‘commentators have insinuated that ‘fat cat’ payments will follow, but actually the issue is one of responsibility’
Source
Housing Today
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