CCH Response to The Housing Corporation's "Board member remuneration"
February 2003
1. The perception of the housing association sector
The Housing Corporation's paper on board member remuneration indicates that the decision to allow associations to pay board members has already been taken, and that those who wish to respond are only being asked to comment on how this should be done.
We would urge the Corporation to step outside the closeted world of the housing association sector to carefully consider how such a decision will be received by the general public.
The Corporation will be aware of the National Housing Federation's "Housings Better Future" campaign (HBF). This campaign has highlighted that:
- public perception of the housing association is poor;
- a decreasing number of people actively want to live in housing association homes (even amongst those that live in them);
- housing association tenant satisfaction has been gradually falling over many years;
- and that public interests are harmed by the failure of most housing associations to work with each other.
HBF has set out to address both perceptual and actual difficulties with the housing association sector - a major challenge, but that the Corporation is to launch its decision that housing association board members can be paid at about the same time will inflict further serious damage to the housing association sector.
2. Is the Corporation addressing the wrong problem?
The justification for payment of board members is the difficulty some housing associations are having recruiting appropriate voluntary board members. We would suggest that this might actually be a symptom of a wider problem - that the association does not have the community links it ought to have in all the areas it operates in that would generate voluntary board member interest.
If it does not have those community links, then perhaps it has already failed and the association needs to rethink the way the association operates so that it can develop voluntary board member interest.
Therefore, prior to introducing board member payments, the Corporation should make it mandatory that the association carries out a community audit in all areas in which the association operates to consider what links it has with communities in those areas, and what steps it will take to build them if necessary.
We are also concerned that board member remuneration may put off those board members who do not want to be paid for what they perceive to be a voluntary role. Given recruitment shortages in the housing sector, would there be anything like enough potential recruits for paid association board member posts if there were a mass exodus of voluntary board members?
As a minimum the Corporation should make it mandatory that any board member can refuse to accept board member remuneration at any time, and that not conflict with their board membership.
3. Regulation
The consultation paper suggests that it is important that the case be made for board member payments, but indicates that the Corporation is not intending to do anything to regulate board member payments.
We do not consider that there is anything to suggest that housing associations will behave responsibly on this issue. The general failure of associations to work in partnership in local community areas for the good of the community alone would suggest that when the Corporation starts to allow board member payments, there will be a free-for-all, and if these powers are unrestricted, we would envisage that board member payments will become the norm in housing associations within five years.
The Corporation should ensure that a housing association's decision to make board member payments is thoroughly scrutinised independently prior to any payments.
If the Corporation does not feel able to regulate on this issue, then we would propose that it should be mandatory that:
- If an association wishes to pay its board members, it makes the case to the general public in all local authority areas in which it operates.
- A housing association's board's decision to pay itself should be submitted to an independent panel, consisting of tenant, local authority and other community representatives (where the composition of the panel is not chosen by the association). This independent panel should then become the "line manager" of board members who receive payments.
- Either there is a tenant ballot on the issue and payment of board members should only proceed if a majority of tenants vote in favour.
- Or, if there are a certain percentage of tenants who are members of the association (say 50%), there is a ballot of members of the association.
- The above ballots should be carried out on a regular basis (say once every five years) to ensure proper ongoing accountability.
4. Tenant board members
The consultation paper pays little regard to the issue of tenant board members. Payment of tenant board members will be a hugely complex issue for three key reasons:
- It is potentially divisive amongst tenants. The only example in social housing of tenants being paid to be on boards has been the Housing Action Trusts where the experience has been mixed. Certainly in at least one of the HATs, paying the tenant board members was possibly the single most important reason why the HAT was unable to generate any significant community engagement on the estate in question. Tenants perceived the tenant board members as being on the board for the money that they received and that their loyalty was to the HAT (which by law it had to be) rather than to the residents and community on the estate. If other tenants do not perceive tenant board members to be at least morally accountable to them, one could question whether they would be serving a useful role.
- How will tenant board members be selected/elected? The consultation paper suggests that if board member payments are introduced, then the board member should have an appropriate range of skills, knowledge and experience and should be recruited in a similar way to a member of staff. Would this apply to tenants? What would this mean for the relationship between tenant board members and other tenants? On what criteria would tenant board members be selected?
- A way that this and the above point might be resolved would be to create a legal structure for housing associations (which the Corporation would then require associations wishing to make board member payments to use) where its rules state that tenant board members will be elected by the association's tenants, and are legally accountable to them, as opposed to being accountable to the association itself.
- It would be irresponsible and discriminatory for the Corporation to introduce board member payments unless it had first resolved the benefit issue - ie. whereby tenant board members would lose their benefits if they received board member payments (and would even lose benefits if they choose not to receive board member payments). It would run counter to every Government policy on social exclusion if the Corporation view it that tenants on benefit should not be enabled to sit on boards.
We would stress that we are not saying here that, if board member payments are to be introduced, that tenant board members should be one category that would be excluded from payment - because that too would be discriminatory. We are saying that until the Corporation has resolved the above issues, it should not introduce board member payments for anyone.
5. The relationship between executive and board - who is accountable to who?
If board member payments are to be introduced, there needs to be some clarity on the roles of board members and the executive. I am sure that the Corporation understands how a housing association board is meant to work, but for clarity, we spell out our understanding of the role of the various parties:
- The purpose of the board is to set the vision and policies of the organisation, to approve the business plan that will achieve the vision and policies and to monitor the implementation of policy (and change policy as necessary). The board is legally accountable to the Corporation and to other statutory organisations, but needs to see itself as morally accountable to the general public for the performance of its duties.
- The chair of the board will usually have a range of particular roles including the line management of the senior member of staff. The chair is accountable to the rest of the board for the performance of their duties.
- The chief executive implements policy decisions made by the board and is accountable to whoever the board nominates as their line manager, who is then accountable to the rest of the board.
- Other staff are then accountable to the chief executive.
The balance between these roles is critical to the success of the organisation. Problems arise in organisations where the chief executive or the chair do not see themselves as properly accountable to the board. In some ways, the role of a board is to ask difficult questions of the executive (obviously in a constructive and sensible fashion) to ensure that performance is improved. Anything that compromises the ability of a board to ask difficult questions will mean that the chief executive (and/or the chair) will effectively become the governing body of the organisation. This will mean that the organisation will become solely dependent on the qualities of one or two individuals, who will not have any lines of accountability.
Introducing board member payments, and therefore insisting on proper recruitment processes, and proper review of performance, will cloud the complex relationships between board member, chair and chief executive. If members of staff are responsible in any way for appraisal of board member performance, then that will compromise the ability of board members to ensure that staff are accountable to them. If board members are accountable to the chair of the board, that too will compromise their ability to play their role on the board.
6. Would it be appropriate to pay members of fully mutual co-ops for their role in running the co-op?
Suggesting that payments should be made to housing co-op board members misunderstands the nature of what a housing co-op is and the importance of ensuring that people who get involved with the running of the co-op do so because they wish to see the organisation thrive.
The Housing Corporation has had difficulties regulating housing co-ops, but that is because the Corporation has little understanding of housing co-ops and has not considered it necessary to devote any resources to producing best practice guidance for housing co-ops on how they should operate. Paying housing co-op committee members will not solve this problem, and if anything it would be likely to make the situation worse.
There are also a number of key questions that the Corporation would have to resolve if the Corporation were serious about allowing housing co-ops to pay their governing body members:
- It is rare that the activity of a co-op will be confined exclusively to the co-op's committee - other members of the co-op will usually play some role in the running of the co-op. Will the Housing Corporation be prepared to accept payments to any co-op member who gets involved with the running of the co-op?
- What will the Corporation do with regards those housing co-ops whose governing body is a general meeting made up of all members of the co-op. Is the Corporation proposing that all members be paid?
- Who would regulate payments in a housing co-op? How would the Corporation prevent payments to co-op committee members becoming a free-for-all?
- A fully mutual housing co-op could not conform to the Corporation's guidelines for open recruitment because their rules will specify that the membership of the governing body is only open to members of the co-op (and membership of the co-op will only be open to tenants and prospective tenants).
7. Is a decision to promote board member payment within the Housing Corporation's powers?
The Corporation's proposals are major and will have a significant effect on public life. They would almost certainly lead to a substantive change in the way that housing associations operate, encouraging them to continue to move away from being organisations with links in the community to corporate organisations which operate at the behest of a small number of highly paid individuals. Presumably those in the Corporation promoting board member remuneration believe that this is the way forward for the housing association sector, and that it should be promoting this sort of association.
For many years, the Corporation has made it clear to the housing co-op sector that it does not have the powers to promote a particular form of association. We consider a decision to enable board member payments is tantamount to the Corporation promoting a particular form of association and therefore not within the Corporation's powers.
We consider that a decision to enable board member payments and how to make board member payments are ones that should only be made by Parliament, and that there should be a full and public debate on the issue (particularly outside the housing association sector), where those that consider making board member payments to be acceptable (including the Corporation) should be obliged to make their case in the public arena and with appropriate scrutiny.
8. Who is the Corporation consulting with?
We would also question the nature of the Corporation's consultation programme on this issue. Any housing association board member who expresses a positive view on this issue or who argues for a "light touch regulation" on the issue has a conflict of interest - in that they could potentially end up being paid for their services. The Corporation should publish the results of this consultation programme, clearly separating responses from those who may benefit from these proposals from those who will not benefit from them.
