Issues for trustees considering a CEO’s remuneration.

Marie Stopes International  has been warned by the Charity Commission that its work faced being “undermined” over the decision   to award its CEO a bonus equivalent to his salary.Simon Cooke  the chief executive earned £434000 last year  including bonuses- up from £300532 in 2017.

The charity had not been able to provide the Commission with evidence that a proper and robust discussion took place either at full board or at the charity’s remuneration committee about the appropriate level of pay to be awarded to the CEO. Nor could the trustees show that they had taken into account all the relevant factors, as required by the Commission’s guidance. The trustees had told the Commission that a robust discussion did take place, but was not properly noted or minuted.

The trustees have been issued with formal advice under section 15(2) of the Charities Act 2011, requiring them to “review the factors it takes into account when making decisions about the CEO’s remuneration”. The trustees have also been directed to ensure that all their decisions are adequately recorded so that the factors taken into account are clearly set out, as well as the final decision.

This is a good reminder to charities to ensure they have adequate procedures in place when assessing appropriate levels of remuneration for employees and that evidence of the decision making and reasons can be produced if required as evidence.

Ultimately the decision on how much to pay a charity’s CEO is for trustees to make. The Commission cannot dictate to charities how much they should pay their staff.

However, charity law sets out the duties and responsibilities of charity trustees. These include principles that must be followed when making decisions on behalf of their charities. Those principles are reflected in our published guidance: The Essential Trustee, and It’s Your Decision.

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