Kids Company facing more music

Two years may have passed, but the fallout from Kids Company’s public and rather dramatic collapse shows no sign of abating.

A couple of weeks ago a statement from the Insolvency Service appeared on gov.uk announcing what had previously been mooted – that the Business Secretary intends to bring proceedings to have the former directors ‘disqualified from running or controlling companies for periods of between two-and-a-half and six years.’

Then Paul Flynn MP, a member of the Public Administration and Constitutional Affairs Committee (PACAC) involved in the Kids Company investigation, wrote on his blog that he was glad about the directors being brought to book, but was clear that there was ‘unfinished business’ for the Committee, specifically in relation to the two ministers who ‘handed over £3 million of taxpayers’ money to Kids Company a few days before they collapsed…in defiance of published Civil Service advice.’

Oliver Letwin and Matthew Hancock are probably not losing sleep over this yet, but if the Kids Company directors follow through on their intention to ‘vigorously defend themselves against any disqualification’, as reported by Third Sector back in April, they may have a few interesting questions to answer.

It all leaves a nasty taste in the mouth, not least because Kids Company almost certainly wouldn’t have become the buzzword for rubbish charity governance if the protagonists weren’t perfect targets for nastier sections of the media: ‘BBC Bigwig’ Alan Yentob, and Camila Batmanghelidjh – flamboyant, female and foreign.

The Governance was poor – in fact, it was terrible, inept, lazy, predictable, embarrassing and frustrating to the many people (like me at the time) working in or with better run organisations also dealing with very vulnerable young people. Sadly, however, there are plenty of charities governed by people with far worse intentions, and, amongst the almighty mess, it should not be forgotten that the responsibility for wasting public money does not lie with Yentob and chums: this is the fault of those who repeatedly filled up the coffers, despite ongoing advice to stop.

The PACAC investigation has since been turned into the most improbable of musicals. With the trustees now looking likely to face some music of their own [sorry], the producers of ‘Committee, A New Musical’, may want to start thinking about a sequel.

Charity chief executives, however, should watch carefully what happens next for different reasons – because the announcement from the Insolvency Service includes a line which may have significant consequences.

The proceedings will allege that Batmanghelidjh acted as a ‘de facto director’ and should therefore also be disqualified from running or controlling other companies. This despite that fact that, as chief executive, she was clearly not a director at the time the charity collapsed, and was not allowed to be under typical charity governance rules.

CEOs have been facing this conundrum for many years, but the increased expectations of and reliance on charitable organisations has brought the matter to a head. A CEO is delegated responsibility to run the show on a day to day basis, but has no accountability for what actually happens. Most try and get things done their way, manage everything about the charity, hope that their Chair has no ego, and feel accountable for everything that happens.

And this is exactly what a good CEO should do. There is no sense in multi-million pound organisations being governed entirely by time-poor individuals few of whom really know what is going on at an operational level. It is a ridiculous system, but this fudged approach to directorship is how most charities currently work.

Until now. The ‘de facto’ director line is a clear attempt by the Insolvency Service – or rather the Business Secretary – to batter Batmanghelidjh a little more. But if she is indeed found to be a director in law, the implications could go way beyond their intentions.

In trying to take Kids Company to task, the Business Secretary may have accidentally stumbled upon the answer to the biggest outstanding problem with charity governance. The only logical solution for the governance of charities is to ensure that the senior person (or people) running them on a day to day basis is also a director.

Charity chief executives need to be equal in status to non-execs on the boards of their organisations. It would be most odd if the pursuit of Batmanghelidjh ended up being the accidental catalyst for wholescale change for better charity governance. It may even be worthy of an opera.