The UK Corporate Governance
Code was developed with the governance of listed organisations in mind, but
still needs to be implemented to cover organisations with different
accountability structures. A governing board of directors or executive team has
three core functions:
- To ensure clarity of ethos, vision,
and strategic direction.
- Holding the management team to
account for the organisation’s performance.
- Overseeing the organisation’s
financial performance and ensuring that monetary resources are used to
advantage.
Governance systems can vary
depending on the organisation’s purpose and the sector in which they operate.
For example, a publicly traded organisation may be subject to more stringent
governance requirements, such as regular financial reporting and independent
audits, to ensure transparency and accountability to shareholders. On the other
hand, a nonprofit organisation may have a governance structure that emphasises
mission and impact, focusing on serving its constituents' needs.
A sound corporate governance
policy is essential for any organisation looking to achieve long-term success.
By promoting effective decision-making, ethical behaviour, and operational
efficiency, governance policies can help to mitigate risks, build trust with
stakeholders, and drive sustainable growth. As such, organisations of all sizes
and industries should prioritise the development and implementation of robust
governance systems to ensure their continued success in an increasingly complex
and competitive business environment.
Governance Within Social
Housing
Within the social housing
sector, housing associations' governance and financial viability are crucial to
providing low-cost affordable housing, funded through public financing in the
form of housing benefits, amongst other income streams. The responsibilities of
executive directors within housing associations are:
- To set the housing association's
strategic aims and objectives.
- Provide leadership to put the aims
and objectives into effect.
- Function as the leader of the
management team of the organisation.
- Report to the more comprehensive
board of directors within their stewardship.
Housing associations in the
UK operate in a highly regulated sector. They are principally registered
societies operating under the Co-operative and Community Benefit Societies Act
2014. As such, housing associations are accountable to the Regulator of Social
Housing (RSH) for how they are run and operated.
Social Housing Operating
Standards
The RSH reviews and
publishes its assessment of the financial viability and governance of housing
associations by awarding the following standards for governance:
- G1: The housing association complies
with RSH governance requirements.
- G2: The housing association is
compliant but must improve its governance to increase compliance.
- G3: The housing association is
non-compliant because it does not meet the RSH’s governance requirements.
There are severe regulatory concerns that the housing association must
address.
- G4: The housing association is
non-compliant as it does not meet the RSH governance criteria. There are
severe regulatory concerns, and the housing association is subject to
regulatory intervention and enforcement action by the RSH.
The RSH awards housing
associations the following standards for their financial viability:
- V1: The housing association complies
with RSH financial viability requirements for adverse economic scenarios.
- V2: The housing association complies
with RSH's financial viability requirements for adverse economic
scenarios. However, it must improve its financial risk management to
ensure continued compliance.
- V3: The housing association is
non-compliant due to severe regulatory concerns, which the housing
association must agree to improve.
- V4: The housing association is
non-compliant because it does not meet RSH's financial viability criteria.
There are severe regulatory concerns, and the housing association is
subject to regulatory intervention and enforcement action by the RSH.
Corporate Governance and
Leadership
The UK National Housing
Federation has published a Code of Governance detailing the standards of
leadership and control required to assist housing association boards in
defining their operating values. The Code of Governance requires housing
associations to ensure that:
- Customer views, needs, and
requirements form the heart of the housing association's strategic
decision-making through initiatives such as “together with tenants.”
- Customers and staff are kept safe.
- Housing association boards and
executive teams oversee risk and robustly evaluate the impact of risk
scenarios on the housing associations' future.
The Executive Team and Board
of Directors
A housing association's
executive team works with its management structure to drive its strategic
development and raise its performance by establishing and positively
reinforcing its vision, aims, and objectives to maximise the use of its housing
assets. The executive team provides oversight and accountability without
getting involved in the association's day-to-day management.
Housing association boards
may be made up of any number of members from any number of different roles and
meet formally at prescribed times throughout the year. They may chair other
committees and comprise:
- Chair of the board.
- Chair of the customer experience
committee.
- Chair of the asset and investment
committee.
- Chair of the audit and risk
committee.
- Executive directors.
- Customers/tenants.
- Interested third parties.
The elements of achieving
and improving prominent levels of governance are based on the following
aspects:
- Delivering the housing
associations' organisational aims and objectives effectively and
sustainably.
- Providing strategic leadership
aligned with the housing associations' values.
- Reflecting a housing association's
integrity, ethics, and values in everything it does.
- Making sure that decision-making,
risk, and control processes are informed, rigorous and timely.
- Working as an effective board team
to make critical and informed decisions.
- Having a transparent, practical,
and agreed-upon approach to supporting equality, diversity, and inclusion.
- Ensuring organisational openness
and accountability.
Housing associations are
crucial in providing affordable and high-quality housing to communities
nationwide. As such, they must operate transparently and accountably to ensure
the well-being of their residents and the effectiveness of their services. To this
end, housing associations are responsible for the RSH's operations, with the
RSH monitoring their activities regarding the ‘economic’ and ‘consumer’
regulatory standards for registered social housing providers.
The Governance Role of The
Regulator of Social Housing
The RSH oversees housing
association activities to meet governance and financial viability standards.
This includes monitoring their performance in setting rent levels, value for
money, economic health, and governance arrangements. By holding housing associations
accountable to these standards, the RSH helps safeguard the interests of
residents and taxpayers and maintains the integrity of the social housing
sector.
One fundamental way housing
associations demonstrate their adherence to governance standards is by
appointing internal and external auditors. These auditors play a crucial role
in assessing housing associations' performance across various critical areas,
including financial management, risk management, compliance with regulatory
requirements, and the effectiveness of internal controls. By conducting regular
audits and reporting their findings to the RSH, auditors help ensure housing
associations operate responsibly and accountably.
In addition to monitoring
governance standards, the RSH also assesses housing associations' financial
viability to ensure they are equipped to deliver high-quality services to their
residents over the long term. This includes assessing their financial health,
capacity to manage risks, levels of debt, and ability to generate sufficient
income to cover their operating costs. By scrutinising these economic
indicators, the RSH helps to identify any potential weaknesses or
vulnerabilities in housing associations’ financial position and take
appropriate action to address them.
By holding housing
associations to account for their operations, the RSH plays a vital role in
promoting transparency, accountability, and good governance within the social
housing sector. Through its monitoring activities, the RSH helps to ensure that
housing associations are operating in the best interests of their residents and
are delivering high-quality services that meet the needs of their communities.
By upholding the ‘economic’ and ‘consumer’ regulatory standards for social
housing providers, the RSH helps to maintain public trust in the sector and
safeguard the provision of affordable housing for those in need.
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