The move towards professionalising governance

More and more colleges are appointing directors of governance and are even paying their governors, as they look to professionalise these roles in the shadow of mergers and the insolvency regime. FE Week has taken closer look at how and why this practice has come about.

The importance of governors has never been higher, with colleges facing the challenge of managing an increasingly diverse portfolio of business: from colleges, to independent training providers, to multi-academy trusts.

While colleges continue to merge to create “fewer, larger, more resilient and efficient providers”, as was the plan with the post-16 area reviews which ended in March 2017, they’re also battling against tight budgets; and if poor decisions are made, they could find themselves going insolvent, as has been the case with scandal-hit Hadlow College.

The FE college world is more challenging, with funding cuts and pressures to merge requiring more time of governors

Two of the biggest college chains in the country, NCG and LTE Group, have begun efforts to combat this challenge by paying their governors.

In LTE’s case, seven governors were paid a total of £11,833 in 2017-18; while three “co-optees” – people with specific skills and professions who sit on sub-committees – were paid a total of £3,000.

In NCG’s case, one governor was paid £15,000 to be a director of its subsidiary training provider, The InTraining Group.

A spokesperson said it otherwise “does not reimburse its members of corporation, except as direct recompense for out-of-pocket expenses”.

Another prominent college which has started to pay governors is the East Kent Colleges Group. In an interview with FE Week, the group explains that this decision was made due to the significant higher workload required following its merger (see full interview below).

Another way in which colleges have sought to professionalise governance is by hiring what are known as directors o governance, to supplant the traditional clerk, to work full-time on processing paperwork, recruitment, and advising governors and managers.

FE Commissioner Richard Atkins (pictured), who has spoken in the past about bringing more financial expertise on to college boards, has said hiring professional clerks is “excellent practice”.

A number of colleges, including NCG, Bolton and Sunderland, haveadvertised for heads, assistant heads, or directors of governance over the past year.

NCG hired an executive director of governance, assurance and risk in August 2018 – David Balme – and has advertised for an assistant director.

The group, which runs colleges across the country, justified the move by saying the role has “important oversight of a complex organisation”.

London South East Colleges also employed a group executive director for corporate services, Jennifer Pharo, in 2018.

Speaking to FE Week, she described herself as the “glue” keeping the organisation together.

The ICSA governance institute’s not-for-profit head of policy Louise Thomson, said “it wouldn’t surprise her” if there has been an increase in the practice of paying governors.

“There has been in the charity sector. And the FE college world is more challenging, with funding cuts and pressures to merge requiring more time of governors.”

Thomson added that if a college is facing acute financial or other pressures, its board may believe the chair needs to be more “hands-on” and as such ought to be paid for their efforts.

Boards should consider whether payment of chairs would help alleviate their recruitment problems

She explained that if the board was considering paying governors, there should be a sound business case articulating the benefits to the college, its students and wider stakeholder constituents.

She also warned colleges that may be considering it: “Where a governor is paid and finds themselves in court for their action on the governing body, it is likely that the court will hold them to a higher standard than those not being remunerated.”

However, other colleges may find the prospect of paying governors troublesome as it would violate what Thomson called the “sacrosanct” principle of volunteerism, which many see as one that should be protected at all costs, as well as creating a possible conflict of interest.

Writing on the topic in this edition of FE Week, Dr Sue Pember, the former lead civil servant for FE funding and now director of adult and community learning group Holex, said: “If boards of colleges are reporting difficulty in competing with other organisations for governors, they should consider whether payment of chairs and other board members would help alleviate their recruitment problems and agree to apply to the Charity Commission.”

Indeed, aside from NCG and LTE, the other eight biggest colleges by income that were looked at by FE Week do not pay governors, and almost all of them said they are not considering it.

Yet with an increasing number of colleges looking to pay at least their clerks, it may only be a matter of time before governor remuneration becomes much more widespread.

Director of governance: it’s ‘a nice challenging role’

London South East Colleges’ director of governance Jennifer Pharo has described herself as the “glue” keeping the organisation together, as she sat down with FE Week to discuss her role as a professional clerk.

Pharo was appointed to the role in April 2018 and clerks for all the group’s boards: for the college, the multiacademy trust, and its independent training company, and all the group sub-committees such as finance, audit, curriculum and search, and remuneration. It’s what she calls a “nice, challenging role” with a “unique” portfolio of charities.

Very few colleges are also multiacademy trust sponsors, with Dudley College and Stoke-on-Trent counting among the ranks.

Jennifer Pharo

Of her role, Pharo said: “We needed the glue to keep that together, support governors and to make sure the communication and information flow is working around what is our operating system of governance.”

About one-fifth of her time is devoted to recruiting people to fill 35 governor posts across the three charities.

Other times, she is preparing briefs on a range of items, from the Augar Review of post-18 funding to the Timpson Review on exclusions; and even individualised handbooks for each governor, complete with their terms of reference.

Governors, she says, are “very appreciative” of all she does for them.

So, what should colleges be looking for in a professional clerk?

“I have a legal background. I worked as a legal executive for six or seven years, before I moved into investment banking, but I worked within the legal arena of investment banking for about 15 years, at a large Swiss bank,” Pharo says.

After her banking career, she moved into education, to pursue a dream of becoming a teacher.

She has worked in the FE sector since 2002 and has served as head of planning and performance and director of MIS at Lewisham College, which eventually became Lewisham Southwark College, as well as executive director of college services at LSEC.

“So, I’ve got a really good understanding of the business, about finances and the income – all the challenges that we face as a sector.

“I understand all of the regulatory topics, and I have been involved quite intimately with all the funding agencies, so I understand the funding rules and how both colleges and schools operate.”

In order to avoid conflicts of interest, Pharo has put together an impartiality policy to answer questions as to how she can stay neutral in meetings when she is employed by the college and has to safeguard both the governance and the executive team.

The role that we have is the real conscience of the organisation

“The role that we have is the real conscience of the organisation.” She has plenty on her plate for the next few months, including operating plans for the next year for how the meetings will work and how the information is flowing through them.

There are also the board evaluations, which she is starting in September.

On the recruitment front, the college is endeavouring to bring in greater diversity and also keep up its range of skills.

Recently, a senior Department for Education official approached them about becoming a governor. “He felt we were really, really interesting group,” Pharo said. “He really wants to be part of our governing body. And so that’s really complimentary for us.”

Additional commitment requires remuneration

FE Week spoke to the chair of the EKC Group remuneration committee, Jonathan Clarke, about how the decision to pay its chair came about, as well as the practice’s benefits and its risks.

When the merger between East Kent College and Canterbury College, which created the group, was finalised in 2018, the committee realised there was going to be a significantly higher workload for the chair than there had been before.

“As a result,” Clarke said, “the governing body wanted to ensure we had a chair who not only had the skills, but was remunerated for the additional commitment and time they would need to invest in the governance and strategic guidance of the new group”.

Jonathan Clarke

The time commitment was too much for the then-chair, Beverley Aitken, who announced she would be stepping down shortly before the merger.

Into their shoes stepped Charles Buchanan, the chair of the merger’s transition group.

The board decided to pay him £20,000 per annum for 50 days work a year, though Clarke stressed that he works much more than that in reality.

He said: “The decision to remunerate the chair was taken because of the increased need for the group to have one who had a strong business background and experience of guiding large and diverse organisations.

“The size of the new group means that it’s a highly complex operation, and one which requires exceptional governance and strategic guidance.

“We believe the chair brings that to the board, and adds the professionalism required for the role as it currently is.”

Buchanan, the only remunerated member of the board, is a former chief executive of Lydd/London Ashford Airport and Manston Airport in Kent.

He fits the bill for what the board was looking for in the group’s chair: a strong business background and experience of guiding large, diverse organisations.

His role involves many of the same activities any other chair would be expected to carry out: supporting, but also challenging, college managers and meeting with stakeholders, to name but two of his responsibilities.

However, Clarke says a remunerated chair “brings a professionalism, and a wealth of experience in the world of commerce to the table, enabling the board to examine performance in a much more strategic manner.”

Paying Buchanan also means senior post-holders are able to count on their chair being available when he’s required to give his input in any debate.

Clarke was careful not to recommend it to all colleges, and said there may be some disadvantages, though EKC had not encountered any.

But he said the chair, as a paid officer, was held to a higher standard than the other governors.

The size of the new group means that it’s a highly complex operation

Clarke also said governors had to be mindful of doing their jobs correctly, especially considering some recent “catastrophic” failures of college governance.

One such example is Hadlow College, based a few miles from EKC, which entered insolvency in May, after FE Commissioner Richard Atkins reported its board had failed in its fiduciary duty.

Yet Clarke remains optimistic about EKC Group’s approach: “I don’t feel that is a risk. In fact, quite the opposite – it should ensure that remunerated governors have a vested interested in outperforming others, and working even more diligently to deliver the best possible outcomes for their organisation.”

There was not necessarily a “magic panacea” to recruiting professional governors, he added, but remuneration may be one possible solution.

“I think that FE, as a sector, sometimes needs to embrace new ways of doing things, and should also experiment with innovations.”

So how does a college go about paying its governors?

There are special circumstances under which colleges can remunerate governors for services. According to the Association of Colleges, these include periods when a college is restructuring or reorganising, under orders from the ESFA or FE Commissioner.

There can also be a particular problem with recruitment, or a requirement for a board member to commit a significant amount of time, which would allow for governors to be remunerated.

As every college is a charity, if one wishes to remunerate its governors, it has to apply for permission from the regulator of the charitable sector, the Charities Commission.

As colleges are exempt from the Charities Commission’s oversight, the commission will then consult with the principal regulator of colleges, the Department for Education. 

A further education corporation will likely insert the order alongside the instrument of government; while a college set up as a company will insert it into the articles of association.

However, the government says remuneration should not last the maximum duration unless it can be justified, and it cannot be approved retroactively.

A new college can include a power to allow a minority of trustees to receive specified payments or benefits, including remuneration for serving as a trustee.

This does not require approval from the commission, but the wording will, of course, need to comply with charity law.

But where an existing college (which has not been granted permission to pay governors) merges into a new college, the new institution would need to give reasonable assurance that any payment to governors had been paid for by its own funding.