Our Collective Conflict of Interest

As I’ve argued elsewhere (‘Trusts and foundations have a diversity deficit. Is it time for regulation to fix it?’), the charity and not-for profit sector is running out of time to get our own house in order in relation to Diversity, Equity and Inclusion (DEI) – particularly in relation to the leadership and funding decisions in our sector. We can’t continue to let change happen “by evolution” – because that puts the interests of the current power holders first, and it will result in the continuation of the same glacial rate of change that we’ve seen over the past 30 years.

Progress on DEI in the charity and not-for-profit sector must stop moving at the speed of white.

It’s too easy, and it’s increasingly common, to confuse the talk of equality for actual progress towards justice.  And it’s too easy to focus on talking about equality (treating everyone equally) rather than enacting equity (ensuring everyone has all they need to thrive, taking into account pre-existing and persistent structural and systemic inequalities).

We, the insiders with the power, are becoming more adept at signalling how unhappy we are with the status quo – while still being the status quo.

Solidarity of the kind that says – “I stand with you (just so long as I don’t actually have to give anything up or change too much)” isn’t enough.

I’m increasingly of the belief that meaningful change will only happen if we are required to overcome the institutional[1] and structural racism that keeps our sector led by, and in the interests of, white people by default – as described here.

If we continue to fail to change ourselves, we should be regulated to change.

Conflicting Interests:

Regulation is, in part, a sign of failure.  It’s usually required because a group of individuals or organisations acts mainly or exclusively in their own self-interest, and they potentially or actually cause harm to others as a result – directly or indirectly.

One of the main impediments to change on DEI is that those with the power to make the changes needed are the ones who feel they are likely to “lose” something as a result of change.  Effectively, most of those with the power in our sector have a massive conflict of interest when it comes to DEI.  We need to apply a new definition of conflict of interest in our sector – as “maintaining the status quo” (eg power staying in the hands of largely CIS male white boards and leaders) and find ways for that conflict of interest to be neutralised.  And regulation may be the only way to do it.

While re-distributing power may not necessarily be a “zero-sum” game, in practice there are only so many Chief Exec and Chair roles in the sector.  Some of us are going to have to get out of the way if more people who don’t look like us are going to get an opportunity to occupy some of those roles.  Otherwise real change is going to take (even more) generations.

But We’re Too Nice to be Regulated:

Charities and not-for-profit organisations often see it as a particular virtue to be independent – to be free from control, particularly from government.  But we are already regulated in terms of finances, fundraising, etc, because experience has taught us that independence should not be confused with capability.  Nor should it be confused with unaccountability.

For those who are regulated it can feel like an unfair imposition – a curtailing of the freedom or license to act as they wish.  And the concept of “license” is key – ie without regulation we have license to behave as we like (eg to say one thing but do another).  But regulation can also require us (as individuals and organisations) to be licensed – eg to prove we are competent to do something.

Charities / not-for-profit organisations are not required to prove we are competent at doing very much (apart perhaps from some specialist organisations which are regulated by the CQC and OFSTED).  We’re certainly not required to prove that we’re truly competent when it comes to DEI in relation to our employment practices, our governance, our services, our grantmaking, etc.

Another argument against regulation is that compliance with it is “expensive” or, at least, “diverts resources from the cause”.  But arguably there is already an opportunity cost that individual organisations and the sector as a whole are paying by not benefiting from true diversity.  And there is the risk that the continuing lack of diversity in our sector will be the next public scandal (eg Oxfam’s safeguarding failures).

Regulation to Enforce or to Empower?

Regulation is usually perceived as someone more powerful than us making us do something we don’t want to do.  But in terms of DEI it would be because we won’t do something that someone less powerful needs us to do and has a right to expect us to do.

We need to shift the paradigm – not simply to use regulation to correct or penalise organisations that won’t enact DEI – but use it to empower and enable those who are disadvantaged by our sector’s lack of diversity.  We need to begin to think of regulation as a positive – a tool to empower the rights holders outside, and the progressive people within, duty bearing organisations which are slow to adopt DEI.

How to Regulate:

Regulation is usually two types:

• Voluntary (self-imposed) – including self-regulation.
• Mandatory (imposed by others).

To be effective regulation requires:

• Relevance (but who decides?)
• Clarity
• Integration (to maximise efficiency by linking to existing regulatory requirements and minimise the cost of regulation and compliance)
• Support (to understand and implement it)
• Compliance
• Enforcement
• Sanctions
• Review / updating

Despite the recent development of DEI strategies and toolkits by some of our sector’s trade bodies such as the Institute of Fundraising, ACEVO and the Association of Charitable Foundations (though noticeably not yet by others such as Charity Finance Group and Small Charities Coalition), our sector is nowhere close to regulating itself on DEI.

An interim step is greater transparency – where organisations publish more detailed information about themselves and their activities.  For example:

• Using initiatives such as Grant Advisor UK to become more transparent about diversity (but it’s currently voluntary for funders to register).
• Encouraging the 360 Giving standard to adopt a new indicator on whether organisations are “of” or “for” – eg whether they are led by people of colour or are providing services to people of colour (but it’s currently voluntary for funders to join).
• Ensuring that examples of good practice (such as the Code of Governance) and quality marks (such as NCVO’s Trusted Charity standard) have meaningful indicators on DEI – not just references to “diversity” (but it’s currently voluntary for charities to use them).

But self-regulation on DEI doesn’t just apply to our organisations regulating themselves.  It means we as individuals have to regulate ourselves in terms of our knowledge, attitudes and behaviour.  It means those of us with power, status and its attendant personal income need to decide how we are going to use those benefits to make way and shift the power.

What to Regulate:

Regulation doesn’t mean “uniformity”, nor will it necessarily “stifle innovation”.  The National Audit Office’s guidance on regulation highlights the purposes of regulation – many of which are obviously directly related to our sector – including:

• To ensure a level playing field for businesses [eg charities] to compete
• To protect rights, safety and citizenship
• To maintain standards in education, health and social care
• To ensure stability and integrity and protect consumers [eg staff and service users of charities]

But we have to be clear about what we are trying to regulate (eg behaviour, processes, outcomes?) and why.

Regulation shouldn’t be about quotas and targets.  That will just encourage a tick-box, minimal response.  As an example, in 2017 the Parker Review set a target for every FTSE 100 company to have at least 1 person of colour on its board by the end of 2021.  Currently, with less than two years to go, only 53 have achieved this.

Regulation should be driven by conviction – that change on DEI is important because it is fundamental to social justice – and it should be adopted willingly because we should be honest with ourselves that sometimes we need help to change.

Regulation can be about process and form – eg that charities must publish certain information (eg staff and board diversity data) as some of us already have to do for pay bands and as some funders are doing (largely those which are government arms-length bodies such as Lottery distributors – for example the National Lottery Community Fund) and larger employers have to do for gender pay gaps.

One of the other speakers at the Race to the Top event on 13^th February 2020, Fozia Irfan (Chief Executive of Luton and Bedfordshire Community Foundation) coined the term ‘coercive isomorphism‘ – where funders force grantseekers to behave in certain ways in order to get funding.  Although this has significant disbenefits, it could be used to encourage organisations seeking funds to do more to enact DEI.  However, most funders have a long way to go to enact DEI themselves.

The other side of ‘coercive isomorphism’ is ‘elective isomorphism‘ – where funders (and other types of organisations) consciously or unconsciously adopt forms and behaviours that mimic other funders.  Those forms and behaviours in turn help to create and sustain the culture of those individual organisations and, cumulatively, within a large part of the sector.  It’s partly because we follow good practice (as promoted by our membership bodies), official guidance (eg Charity Commission publications) and existing regulation (encouraged by our advisors such as auditors).  It’s also due to simply mirroring what we see in other organisations – especially ones we think are similar to us or ones we think are leaders in our particular sub-sector.

So, we need to create new guidance, regulation, defaults, routines, measures, etc, so that a progressive values-based, impact focussed, equity driven way of governing and operating becomes the norm.  Essentially, we have to use elective isomorphism (peer pressure and competitive tendencies) to advance change on DEI.

There are also lessons we need to learn from the failure of regulation in other sectors.  For example, following the worldwide financial crash in 2008, Gordon Brown (then the UK Prime Minister) said:

“We know in retrospect what we missed.  We set up the Financial Services Authority believing that the problem would come from the failure of an individual institution… so we created a monitoring system which was looking at individual institutions. That was the big mistake. We didn’t understand how risk was spread across the system, we didn’t understand the entanglements of different institutions with the other and we didn’t understand even though we talked about it just how global things were…”

It’s not enough to think of our lack of DEI as a problem in individual organisations.  We have to tackle it, and show how we’ve tackled it, as a whole sector.

Who Regulates:

The principal regulators of the UK charity and not-for-profit sector are:

• Charity Commission, OSCR and Charity Commission for Northern Ireland (including collectively overseeing the Charities SORP).
• Companies House and the Office of the Regulator of Community Interest Companies.
• Other specialist regulators such as CQC, Ofsted, the Regulator of Social Housing and the Financial Conduct Authority for co-operatives.

The Charity Commission has a Diversity and Inclusion Strategy (in line with its duty under the Equality Act as a public body) but it is entirely internally focussed.   And I don’t believe the Charity Commission is competent to regulate the sector on DEI issues, not least because it appears to be using what’s currently popular (ie what “the public” says in surveys) to shape its strategy.

Also, the current Chair of the Charity Commission’s focus on “the public’s trust in charities” (which she seems to define exclusively as what she believes Daily Mail readers would find acceptable) leads me to believe that she has not understood the National Audit Office’s guidance which says:

“Consumer expectations can also be shaped by public opinion and social media. This can help regulators to identify issues.  However, regulators often need to balance the current views and needs of different communities with the longer-term view that is needed for effective regulation.”

Nor do I believe that any of the other regulators is competent to regulate the sector on DEI issues, although I think they must all integrate DEI issues into the regulatory frameworks they already apply to the sector.  For example, DEI reporting should be made mandatory under the Charities SORP.

Each of these regulatory bodies should:

• Publish how they have got their own houses in order in relation to DEI (eg in terms of their senior leadership and Boards).
• Produce and publish their own DEI strategies – relating both to their own organisations and to the work they are doing to support and regulate the sector. The Civil Service dashboard is an interesting example of how public bodies can demonstrate the change in their organisations over time under some key DEI indicators.
• Produce and publish the Equality Impact Assessments they carry out for any new policies or programmes they develop.

The Equality and Human Rights Commission could play a role in helping these regulators to develop DEI strategies.  In time, if our sector continues to be slow to change, it might also be necessary to ask the EHRC to carry out a formal investigation into our sector.

In the meantime, we should ask the Race Disparity Unit to carry out a review of race in the UK charity / not-for-profit sector – in conjunction with the governments of the 4 home nations – and publish the results on the basis of “explain or change”.

Informal Regulation:

As well as mandatory and voluntary regulation, there are other factors which form part of the “regulatory environment”.  For example:

Trade unions have a role to play in publicly holding charity and not-for-profit organisations to account as well as supporting people within organisations who are trying to encourage improvements on DEI.  This requires the development of a strong whistleblowing culture in our sector and robust policies in individual organisations.

The Press and other media have a key role to play in publicising the lack of diversity in our sector.  They should work with equalities bodies (statutory and non-statutory), regulators and pressure groups (such as #CharitySoWhite) to investigate us (particularly big charities, trade bodies, and trusts and foundations) and then publish our failings annually.

Social media is already being used effectively by advocates and movements for social change – eg #CharitySoWhite and Action for Trustee Racial Diversity.  As part of this, interested groups and stakeholders should develop a DEI charter which says what every charity (perhaps over a certain size) should do and publish about its approach to DEI (eg showing its performance against certain DEI indicators).  We should then widely publish information about the charter and encourage stakeholders (internal and external) to hold each voluntary organisation to account via a 4-step process:

(1) Ask the organisation a question (eg “why have you not published your charter response” or “why have you only done X in relation to indicator Y”?) on social media and ask for a reply.

(2) Publish the response on social media along with your view on whether the response is satisfactory.  If you have had no response to your initial request within 1 week – ask again and copy in at least one other person in that organisation (eg the Chair).

(3) Publish any further response, along with your response to it.  If the organisation’s response is still unsatisfactory (or you have had no response), forward your correspondence to Civil Society and Third Sector and ask them to follow it up with the organisation and publish the results.

(4) Encourage others to give positive feedback on good responses to the charter by other organisations.

Who Regulates the Regulators:

Thinking about our sector as a system – we need to mobilise all parts of that system to encourage, support and require change.  Not only is that more likely to create and sustain change on DEI, it is also more likely to ensure that power is not vested in one single regulator – particularly not one which is controlled by political appointees.

Either we change our sector ourselves or we should be required to change.

The way this goes is – for the moment – up to us.  And time should not be on our side. 

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[1] Institutional racism, as defined by the Institute of Race Relations, is “that which, covertly or overtly, resides in the policies, procedures, operations and culture of public or private institutions – reinforcing individual prejudices and being reinforced by them in turn”.