Codes from other sectors
A Code for Sports Governance
Though the Code for Sports Governance sets the standard for governance in the sector and must be complied with by all bodies funded by Sport England and/or UK Sport, organisations in the sport sector comprise a number of different forms and their activities may also bring them into contact with other sectors’ codes of governance. The corporate and charity sectors are two such areas.
The UK Corporate Governance Code
The UK Corporate Governance Code is the current form of a document which traces its lineage to the Cadbury Code in 1992. In its various iterations, it has formed the backdrop for governance in the UK. In 2018, the Financial Reporting Council (FRC) published the latest edition of the code, which applies across the business and financial services sector. The most recent version places a much greater emphasis on relationships between companies and stakeholders and on establishing an effective corporate culture.
The code operates on a ‘comply or explain’ basis: Premium Listed companies are required to report in their annual report and accounts how they have applied the code or to explain why they consider it appropriate for their circumstances to have deviated from its recommendations.
The code is structured around five sections, each containing the principles to be applied in the governance of a company.
A. A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society.
B. The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.
C. The board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed.
D. In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective engagement with, and encourage participation from, these parties.
E. The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern.
F. The chair leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive accurate, timely and clear information.
G. The board should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board’s decision-making. There should be a clear division of responsibilities between the leadership of the board and the executive leadership of the company’s business.
H. Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account.
I. The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function effectively and efficiently.
J. Appointments to the board should be subject to a formal, rigorous and transparent procedure, and an effective succession plan should be maintained for the board and senior management.
Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
K. The board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the board as a whole and membership regularly refreshed.
L. Annual evaluation of the board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively.
M. The board should establish formal and transparent policies and procedures to ensure the
independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statements.
N. The board should present a fair, balanced and understandable assessment of the company’s position and prospects.
O. The board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives.
P. Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the company’s long-term strategy.
Q. A formal and transparent procedure for developing policy on executive remuneration and determining director and senior management remuneration should be established. No director should be involved in deciding their own remuneration outcome.
R. Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance, and wider circumstances.
The Charity Governance Code
The Charity Governance Code is currently in its third iteration, with a refreshed fourth edition expected in the autumn of 2020, following a recent consultation. This code is produced by a Steering Group of sector bodies and umbrella bodies, including NCVO, Acevo, The Chartered Governance Institute, the Small Charities Coalition and the Association of Chairs. The Steering Group acknowledges that charitable organisations may have sector-specific codes to which they must adhere, naming the Code for Sports Governance as one such document.
This code is aspirational, aimed at continuous improvement. It operates on an ‘apply or explain’ basis, a slight tweak to the FRC’s ‘comply or explain’.
Its principles are as follows.
The board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably.
Every charity is headed by an effective board that provides strategic leadership in line with the charity’s aims and values.
The board acts with integrity, adopting values and creating a culture which helps achieve the organisation’s charitable purposes. The board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly.
The board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment and management systems are set up and monitored.
The board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions.
The board’s approach to diversity supports its effectiveness, leadership and decision making.
The board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.
A rationale is provided for each principle, as well as a set of key outcomes which are the intended results and examples of recommended practice to meet the principle.
This quick tour through some of the principal governance codes should highlight that many of them contain a number of similarities. In part, this is because many share a common heritage, with the Corporate Governance Code being the document that many look to when writing codes specific to another sector. But it is also because the principles of good governance apply across different sectors of the economy. For sure, different sectors face challenges which are particular to certain activities. However, accommodating these challenges generally requires adherence to the good practice which is by and large universal.
For members of the Sports Governance Academy, the code of primary importance is the Code for Sports Governance. Organisations in receipt of funding from Sport England and/or UK Sport will be compliant with the Code. However, in the interest of continuous improvement and for those organisations who are maybe looking to apply for funding under the Code for the first time, the Related tools section provides additional resources and questions for boards and governance leaders to think about in order to apply good governance practice under each principle of the Code.
The guidance and other information published by the SGA represents good governance practice. It is not intended to replace the requirements which any funded bodies have agreed with Sport England or UK Sport as part of their investment. In all cases, organisations must satisfy those requirements in the first instance as their award will be conditional on meeting them.