A couple of weeks ago, I was having a conversation with one of my clients, a global private equity firm headquartered in New York. We were discussing how many of its partners around the world are already on charity boards, as we seek to help their London-based partners on their journey to trusteeship. I asked my friend what the expectations were of her US colleagues, once they get onto a board, to which she said that they are all expected to give something in the region of $10,000 to $50,000 per year for the privilege. She said it as though it is the most natural thing in the world.
I like to think of our friends in the US as close relatives, or at least, cousins. But just as in a real family, we can be close and yet very different.
And so, with this rattling around in my mind, as luck would have it, I had the opportunity to sit down last week for a fireside chat with Rob Acton, Managing Director of the US B Corporation, Cause Strategy Partners, for a conversation about fundraising and the expectations placed on board members in the US versus the UK. Rob’s firm, like my own, helps senior leaders and emerging talent from the corporate sector take on board roles with not for profits. The conversation with Rob sought to find the areas of common ground, the points of divergence, and any emerging trends.
But before we get into the substance, we need some context. Firstly, the UK market.
Almost 60% of charity leaders say income generation is one of their top three issues. Many have been using reserves to make up for a lack of income which is not sustainable. However, there is some good news.
The UK is the 3rd most generous nation in the world with 71% of people giving to charity. This is just one of the reasons why I like the UK so much. In 2023 individuals gave £13.9bn to charity, which is £1.2bn more than in 2022.
But there are stories behind the numbers. The increase is because of larger gifts, not more people giving. Donors are giving more to fewer charities which suggests a desire to get the most bang for their buck and discernment of where to give, is becoming increasingly important.
Furthermore, this giving is not evenly distributed amongst the population. The top 1% givers, those earning more than £160k per annum, give disproportionately lower sums at £48 per month, versus the average monthly of £68. In fact, it is often the people who can least afford it who give more. And those on average incomes cannot afford to increase their giving.
Another story behind the numbers is which types of charities secure the most support. Overseas charities have seen a 50% drop in donations. I was having lunch with a doyen of the aid sector last week and his view is that the aid sector’s business model of relying on major catastrophes every two years to replenish the coffers with unrestricted income is outdated. Of course, there are other factors at play here as well. Charities that are religious, or which work with children or animals have seen the most growth. I always find it amazing that with so much suffering in the world you can always rely on the animal charities to do well. I have nothing against animal charities, it is just an observation.
Pressures of the cost-of-living, inflation and the pandemic, makes raising money from individuals difficult and this will not change any time soon. Charities that have over the years invested in Major Gifts, Trusts and Legacy giving have shown greatest growth.
Social finance has been with us for some time now and in 2022, £9.4bn was invested in all sorts of activities. The largest chunk, £5bn, was invested in homes run by charities such as P3 which has created 300 homes in the Midlands.
For charities with public sector contracts, only 25% have seen an uplift in line with inflation and most are subsidising their public sector work out of their own income. Some, such as the Salvation Army, do this strategically, but others are not being paid the cost of delivery. New Philanthropy Capital estimates that charities are propping up the state by over £2bn per annum – that is a lot of propping up.
So, what is the funding landscape like in the US?
One thing we have in common with our US ‘cousins’ is that charities, or as those in the US like to say, ‘non-profits’, are ultimately run by a board of directors or trustees. But that is about where the similarities end when it comes to the expectation on board members to fundraise.
Whilst the fundraising landscape more broadly is similar, and one thing I learned from Rob was that this year has seen a diminution in funding for charity as people give to political campaigns, the role of the board member is different.
In the UK, trustees take ultimate responsibility for the fundraising activities of their charity. This is still the case even when they have delegated these roles. They need to ensure that any risks or conflicts of interest that may arise in fundraising activities are managed by the charity. But it is very rare indeed for a trustee to be recruited with the expectation that they will contribute personally, or that they will be organising fundraising galas and tapping up their network for money.
A couple of weeks ago I was having lunch with an ex-Save the Children executive who shared the story of how it is hard to attract people to a development board because the sorts of people that join, and say give £1m personally, will be broke in a few years as all their friends they have tapped up will come back to them for their turn. So, whilst giving £1m for a high net worth individual might not break the bank, giving £5m could!
In the UK trustees are normally recruited for their skills, experience (which could be lived experience), and time. Of course, part of being a trustee is to ensure that the charity is compliant with the law in the way it fundraises. This includes the need to ensure agreements with third party fundraisers are in place and that the relevant licenses/permissions are in place for collections. Their role includes considering the impact of any campaigns on the charity’s reputation. And to ask questions such as: Is your charity meeting regulatory fundraising standards? Is your fundraising programme fully compliant with the Code of Fundraising Practice and the law?
Fundraising is also subject to broader non-charity specific legislation, such as the requirements for gaming, taxation, insurance, child protection and data protection and trustees need to be aware of that. In the US, Rob says, fundraising is not regulated and “it is more like the Wild West”.
So where does that leave us? I have noticed some charities in the UK being more explicit about wanting to attract trustees who can help with fundraising. Sometimes this is written in code – “someone with good networks!” But I think all charities adopting the US approach to trustees where they either “Give, Get, or Go” would be a mistake. Rather, some practical suggestions:
There are simple things that can help create the mindset of trustees playing a part.
1. Have a subcommittee focused on income generation and invite trustees to join.
2. There should be a section in board meetings on income generation. Engage the trustees in the debate. Some will be able to contribute ideas more than others but have it as a fixed feature.
3. Make a point that all trustees should think about their networks and always be aware of opportunities to introduce people to the charity who might be benefactors.
4. Be clear at the recruitment stage what the expectations are, if any on trustees. If for example the charity has an annual fundraising event, be specific that there is an expectation that all trustees attend.
5. Have all trustees claim expenses and gift aid back; it creates a mindset of wanting to help wherever one can.
The US and UK have a rich history of philanthropic endeavour and thank goodness for that. There are fundamental differences between the expectations of board members and whilst this is a point of divergence, there are more points of convergence on the wider funding landscape and much to learn from each other.
Ian Joseph, October 2024