The last few weeks have seen the spending and remuneration habits of UK third sector organisations come under the microscope, with the Charity Commission this week warning large charities overpay.
Chairman of the Commission, William Shawcross, questioned whether the salaries currently paid by 14 of Britain’s leading foreign aid charities were “really appropriate”. His comments came as research by The Daily Telegraph revealed a 60 percent rise over the past three years in the number of executives at these charities earning six-figure salaries.
The same research also showed that the number of staff earning £60,000 or more at these charities rose by 16 percent between 2010 and 2012. This is despite falling revenues and donations in some cases, prompting Shawcross to warn that “disproportionate salaries risk bringing organisations and the wider charitable world into disrepute”.
With just under a quarter of UK social enterprises registered as charities, and 21 percent of all social enterprises having received a donation in the past 12 months, the growing debate on transparency has implications for the UK social enterprise sector.
Previously The Sunday Telegraph published research examining how much of their income charities spend on their charitable aims and objectives. This research showed that, despite paying large salaries to numerous staff, most of the large UK charities spent the majority of their income on their charitable activities. In addition to this, it found that more and more charities are turning towards social enterprise models, becoming more reliant upon trading arms to generate a substantial proportion of their income.
One such organisation is Age UK, which only spent 49 percent of its income on its charitable activities last year, and this week announced it will make up to 90 staff redundancies before the end of 2013.
Responding to criticism in the Telegraph, Age UK Director Steph Harland highlighted the organisation’s dual social enterprise and charity model, generating two thirds of its £168 million income through trading activities (including charity shops). She highlighted the importance of the public better understanding how charities and social enterprises generate their income. “Earning income from trading is becoming increasingly important to charities and Age UK is at the forefront in developing social enterprise activities which are good for our customers as well as making a profit which goes to our charitable work.”
The growing furore over large salaries in third sector organisations prompted Sir Stephen Bubb, Chief Executive of ACEVO, to leap to their defence. Bubb defended high pay as being needed to attract the best talent and most skilled professionals to the sector, highlighting that many charity chief executives earn comparatively less than their public and private sector peers. “What donors and what beneficiaries want is high-quality services from efficient and effective charities”. He added “a strong sector needs strong leaders. We must pay to get them. Not excessive salaries, but professional ones”.
While the moral boundaries of this argument remain blurred, what is clear from this debate is the careful line charities and social enterprises must tread when trying to attract and retain the best talent whilst delivering social value.
Social Enterprise Buzz is a media company dedicated to covering social enterprise news from around the world. We publish a range of stories from startups to entrepreneurship, innovation, and finance, which showcase business making the world a better place. Read more.