Charities in the UK make up a hugely diverse sector, which in the past has not been supported well by reliable cross-sector evidence on its resources, including financial inputs. Following the collapse of a non-profit initiative to fill this gap, the Third Sector Research Centre (TSRC) established a collaboration with the National Council for Voluntary Organisations (NCVO), one of their founding sector partners, to develop a substantial representative sample of nearly 10,000 charities, capturing financial information from the notes to their accounts as well as the accounts themselves, to provide robust longitudinal data on charity finances. The construction and analysis of reliable and robust quantitative data resources on the sector has been an important wider legacy for TSRC, informing an emerging policy on executive top pay in charities as an early impact, following media criticism and subsequent parliamentary and regulator scrutiny. Although this is not widely recognised publicly, the data are also used by ONS in construction of estimates of the contribution of non-profits to the national accounts.
TSRC conducted a sophisticated statistical analysis from charity accounts data on remuneration (charities must disclose numbers of staff paid in excess of £60 000), presented in Autumn 2013 as written evidence to the House of Commons Public Administration (Select) Committee (PAC). This also underpinned NCVO witness testimony to PAC and contributed to NCVOs subsequently published top pay inquiry. TSRC independent analyses showed media criticism stemmed from unrepresentative data and flawed analysis. TSRC’s evidence was disseminated widely through the sector, attracting interest across charity trustees, and contributing to professionalising remuneration practices in smaller and larger charities including through NCVO’s Guidance on Executive Pay Setting policy and practice. NCVO and other key sector commentators felt the robust, independent analysis and trusted interpretation by TSRC had changed the tone of the policy debate, and provided an evidence-base to what had previously been: “ … a largely fact free debate on a sensitive issue”.
TSRC research of ‘top pay’ and associated data analysis in charities provided evidence which influenced the public policy debate about regulating high levels of UK charity executive pay
From inception, TSRC was engaged with leading charitable and philanthropic organisations, regulators, representative bodies including NCVO, and policymakers, to inform its research and knowledge exchange priorities. This built on pre-existing working relationships and the active role played by these key sector bodies in TSRCs scoping stage identifying evidence gaps in key areas of policy and practice for the sector. An early identified TSRC focus was for quantitative mapping and measuring of the highly diverse and dynamic third sector, against a background of highly fragmented sector data.
TSRC had planned to integrate its efforts with the third sector databases developed by Guidestar Data Services. These non-profit arrangements had to be reconsidered when the contractor went into receivership. Subsequently TSRC, NCVO and the Centre for Data Digitisation and Analysis at Queens University Belfast, collaborated to design and develop a replacement and alternative database. This involved capturing financial statistics from the accounts of a carefully-designed sample of 10,000 charities in England and Wales.
An early impact from the data partnership was TSRC’s contribution to the national debate on charity top pay stemming from criticism by two national newspapers of reputedly high executive remuneration packages. By 2013, Charity Boards were under acute pressure to account for executive pay levels; many felt exposed by the lack of any robust cross-sector evidence and the absence of a social (performance) metric on added value of top manager pay. Media and some parliamentary criticism was also levelled at the Charity Commission, with some calls for a regulated charities pay cap or public procurement restrictions to ‘high paying’ charities. By Spring 2013, The Third Sector Journal, saw the top pay debate as a risk to already diminishing levels of individual charitable giving.
TSRC felt that working with sector bodies and others to raise awareness of the data and analysis, and its implications, was a more appropriate way of transmitting the evidence to policy makers and influencers. Using this referred approach to knowledge exchange tapped sectors body’s extensive policy networks raising both profile and credibility.
Remuneration data for the sector was partial and (where gathered by recruitment agencies or sector trade bodies) often subject to restrictions on its use for research purposes. Recognising the need for robust evidence, NCVO announced in 2013 an independent Inquiry into Charities Senior Executive Pay, to report early the next year. Shortly after, the Public Administration Select Committee (PASC) of the House of Commons also announced a review on charity chief executive pay. TSRC contributed directly to both by:
- Developing a special analysis of the TSRC-NCVO data (from 2012) of executive pay across multiple charities
- Extrapolating survey data to cross-sector estimates of pay distribution.
- Providing a stand-alone, policy directed and independent analysis showing sharp top pay distinctions between smaller charities, many of which have no paid staff at all, and (a few) larger charities.
- Providing also for disaggregated evidence and a sophisticated statistical analysis of ‘outlier distortions’ to top pay.
Submitted as written TSRC evidence to PAC, this was also drawn on in witness testimony by the NCVO Chair in December 2013. Subsequently, Prof John Mohan of TSRC submitted similar evidence to the House of Lords Committee on Charities in 2017. The TSRC analysis showed:
- Under 1% of charities paid any senior manager over £60,000 pa.
- Excluding anomalous or exceptional cases substantially reduced the average level of sector remuneration; indicating media reports had been disproportionately influenced by a handful of atypical top pay packages from larger charities.
- Gross top pay (for executives), adjusted to organisation size, was 25% lower across the charitable sector than the private sector
- A broader view of remuneration (beyond base salary) which took into account executive bonuses and other remuneration estimated that charity senior executives were paid 45% less than those in the private sector.
TSRC’s impact, alongside other contributions to PAC, and use in the subsequent NCVO inquiry report, informed and helped change the tone of the [policy] debate. With small charities among the critics of high executive pay, it also provided a baseline informing the sector about itself; influencing Charity Boards and Trustees. A 2013 feature on TSRC evidence in the Third Sector journal was one of the most widely downloaded articles from that journal in 2013. The TSRC analysis also helped inform associated NCVO Guidance to trustees on setting remuneration.
NCVO also acknowledges that the TSRC evidence, combined with their own Inquiry, to see Trustees and Management Boards of some of the larger charities start to rethink issues of transparency in pay policy for executives, and remuneration strategy. At least one very large charitable body has completely restructured its pay differentials and non-salary remuneration as a result; others were likely to be in the process of doing so.
The TSRC contribution was highly valued with NCVO commenting it:
“The TSRC evidence massively contributed to a public interest issue; influencing PAC thinking. It enabled us to engage with the media, confidently, with authority … and to go beyond ‘you would say that wouldn’t you scepticism’ ”.
New Philanthropy Capital also observed:
“The sector was vulnerable to top pay critics … before [TSRC] it did not have the ability to counter criticism”.
It has also contributed to a longer term impact by shifting the pay debate to the more substantive challenges of low pay among charities.
The TSRC experience highlighted the value of a partnership approach which drew on different skills sets in the co-production (with NCVO and others) of the cross-sector database. The ‘top pay’ analyses achieved its impacts by:
- Providing focused and credible evidence for multiple ‘users’.
- Contributing independent and expert evidence-based analysis targeted at a specific policy debate.
- Combining robust cross-sector data, independent analysis, and robust statistical analysis of distributions and variance with TSRC reputation for applied analysis of the sector.
- Working across stakeholders to help in communicating evidence to meet policy-makers needs – in parliament, regulators and individual charities.
The experience also showed that instrumental impacts such as on the top pay debate can also have longer term conceptual impacts. As a result of the analysis, and turning policy makers attention away from what was a misplaced focus on senior executive remuneration, the TSRC data has provided a new focus on wider pay distributions in the sector. This has opened another issue for the sector to start to address, namely the issue of low pay in the sector, which has attracted the interest of the House of Lords Committee on Charities in its wide-ranging 2017 Report.