Over the last month governance in both the not-for-profit and for-profit sectors has received considerable attention.
The closure of the charity the Kids Company has raised wider concerns about the governance of charitable organisations and whether the role of the Charity Commissioners in England and Wales needs to be strengthened. Indeed the Charity Commissioners have recently issued updated guidance for all charitable trustees in England and Wales.
The Kids Company closed when it ran out of funds, and concerns have been subsequently raised as to possible financial mismanagement. This is despite the charity receiving funding not only from the UK government, but also from prominent supporters and major companies. It seems the charity operated with low reserves, and was not sustainable.
Another set of governance issues has affected the Halo Trust, involved in landmine clearance. Angelina Jolie, a well-known supporter, recently left the board of trustees following an argument reported to be to over the payments made to two trustees to carry out a review of governance.
In the corporate sector, an investigative panel found that company executives at Toshiba had been complicit in exaggerating earnings, amunting to almost $7bn over seven years. The reported earnings reflected delays in the recording of losses and an under-estimation of project costs. The announcement of the inflation of earnings lead to the resignation of half of the company’s 16-person board and the company’s share price falling by over a third.
It is worth noting that the scandal at Toshiba came to light as a result of the actions of a whistleblower and rather than the work of the auditors. While the case of Toshiba raises again concerns about practice of corporate governance in Japan, including the weak role of external directors, it is important to remember that in many other countries, including the UK, there have recent cases of companies over stating their earnings.
The cases cited above, once again emphasise that good governance cannot be taken for granted and vigilance for those responsible for overseeing governance in any organisation, whatever its purpose, is always necessary.
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