West Somerset Railway General Discussion

No that's not the line I'm suggesting at all. All the WSRA Trustees needed to do was to satisfy themselves that their decision making complied with the Charity Commission guidance that Tom refers to. However some posters appear to be suggesting that employment by the supported company would be a conflict while volunteering for the same organisation would not. The distinction between losing your job if the funding support is not given and losing your opportunity to volunteer seems to be wholly artificial. Indeed if that level of involvement is material volunteers may be more of a risk than employees. Were the supported employer to say to the employee "vote the way we want or you will lose your job" there would at least be the potential for some third party moderation through mechanisms such as employment tribunals. The employee has some protection. A supported company saying to a volunteer "vote the way we want or you can forget about any future volunteering" would leave the volunteer with no redress. Potentially the apparent conflict of interests may be greater for a volunteer.

 

Conflicts of loyalty
These conflicts of interest arise because, although the affected trustee does not stand to gain any benefit, the trustee’s decision making at the charity could be influenced by their other interests.

For example, a trustee’s loyalty to the charity could conflict with their loyalty to:

• the body that appointed them to the charity
  
  
• the membership or section of the charity that appointed them to trusteeship
  
  
• another organisation, such as their employer
  
  
• another charity of which they are a trustee
  
  
• a member of their family
  
  
• another connected person or organisation

The above rules, according to the gov.uk website, appear to be very clear on what a conflict of interest covers regarding an employee and a role as trustee of a charitable organisation. I also know of other employees who were " lined up" to be trustees of the charity.

https://www.gov.uk/government/publi...alty,another connected person or organisation

 

I find this reasoning really difficult to swallow and quite frankly concerning given it's source. It conflates entirely separate areas of law, and introduces unnecessary confusion about core principles.

As @DeeC observes, the trustee or director owes their duty to the body on whose board they serve. The conflict of interest exists where their decision may be influenced by factors that are external to that body's direct interests. The analysis of whether a conflict of interest exists, and of the effect that it may have on the decision, has to be based on the influences over the board's decision.

The fact that there may be other remedies, for example under employment law, for a trustee who votes against the interests of their employer is irrelevant to this. In that scenario, the damage would have been done by the decision taken, and the subsequent consequences would be an entirely separate matter.

I accept that it is separately true that a trustee or director who makes a decision because of their self-interest is not acting in accordance with their duty to the board on which they serve - and that such a self-interested decision would be equally wrong whether made by an employee concerned for their future prospects, or a volunteer concerned for their future volunteering. To lead is to decide, and may require a turkey to vote for Christmas.

For clarity, I use the shorthand trustee/director because the obligations are fundamentally the same whether acting as a charity trustee or company director.

 

Precisely! That specific guidance is about potential conflict of loyalty ( in effect duty) to another organsation the individual works for. That's a diifferent concept from conflict of interest where the individual derives some benefit though the two are often confused. That can occur where the individual or connected persons derive some material financial benefit as a result of the decision. Continued employement or the continued opportunity to volunteer would not normally pass the materiality threshold.

 

No, it is not absurd, in most organisations of any size, the Directors are not "shop floor" employees. Indeed, quite often the CEO is not a Director in bigger organisations, for precisely these reasons (at least in my experience in two nascentbiotech companies, where the founding (scientific) directors were instruced to resign and concentrate on their scientific management duties! And here, we're talking about those who were both employees and directors, so were they or were they not potentially conflicted?

 

Unless they are volunteers directors are normally employees.

 

I think we can all agree that all trustees are bound by a duty to act in the best interests of the charity.

I think we can agree that such duties may be carried out effectively by individuals whether employed or not, by connected organisations or not.

I think many will agree that where a charity is concerned such duty must not only be carried out, but be “seen” to be carried out. Appearance is material to the well-being of a charity that (in our world) is likely to have thousands of members and attract millions in legacies, grants and donations. It is therefore not in the best interests of the charityfor some people to act as trustees where that may give rise to a sense or actuality of bias in their decision making.

The smokescreen (for that is what it is) about the ability of employees to have recourse to an employment tribunal if they were instructed to behave a particular way is ridiculous. Whilst narrowly true in a legal sense, most people wouldn’t know, or would be unwilling to pursue such an action. Materially the employee has far more to lose and is therefore very often more susceptible to persuasion or bullying (depending on how you want to describe it).

This is about (as is so often the case) more than a narrow compliance with the law, which to me is a minimum standard, or indeed a very theoretical protection afforded to one class of individual (the employee). This is about how you ensure that conversations like this one never have to take place!

And why is that important? Because all the big grant givers and many personal contributors of all kinds will undertake their own form of due diligence. You don’t want too many “red flags” if you’re trying to raise millions!

 

So let's compare like with like. Suppose the scenario is the same - a company has a project to build a carriage shed which is contingent on obtaining a grant from a charity in which the project manager is a Trustee. The only differences then being whether that project manager is a paid employee of the company, or a volunteer.

In that instance, if the charity refuses the grant, the project manager employee is materially affected as it puts their continued employment at risk. The project manager volunteer will have their opportunity to volunteer curtailed, but you have frequently been at pains to point out that there is no right to volunteer anyway! So the personal consequence to the individual of the charity refusing the grant is far greater if the project manager is an employee, and therefore the risk of a conflict of interest (where the trustee acts in their personal interest rather than in the charity interest) is far greater.

Tom

 

Surely the point is that whoever is seeking to strong arm a trustee knows that their ability to do so for an employee with contractual rights is much less than for a volunteer without them?

 

Thinking about it there have been at least two libel cases involving Heritage Railways where having read the reports my immediate thought was that why did nobody see problems coming in terms of the way things were set up which lead to the libel allegations.

 

As we have seen with the WSR, a number of volunteers have been shown the door.

They have been deprived of whatever they got from volunteering but their careers continue.

By comparison losing your job can mean calamity including financial hardship, losing your home, having to relocate etc etc .......

 

I wasn't suggesting that anyone was trying to strong arm either - an employee knowing that their continued employment is contingent on obtaining a grant is probably fully aware of their position without needing their boss to tell them!

Tom

 

It is unclear how relevant all this discussion of conflicts of interest or loyalty is to the particular event that triggered the discussion, namely the resignation of three WSRA trustees. It seems pretty clear (even if unverifiable) that they resigned because they could not agree with a decision taken by majority vote. We don't actually know what that decision was, but we surmise that it concerned payment to the PLC. We also don't know whether the trustees who resigned believed that the payment would be in conflict with the charity's registered purposes or had some other concern about it.

Despite these uncertainties for outside observers, those trustees must have had a concern of some sort which was serious enough to prevent them from continuing as trustees. That is enough to amplify the concerns that a lot of us have had for several years about how the WSR and its supporting organisations are run.

 

I fundamentally disagree with that analysis.

Consider it from the perspective of the individual who is conflicted, and being subject to pressure.

As a volunteer, the "threat" that they face is that they lose the ability to volunteer in a way that they enjoy. That is significant, but not fundamental to them. Given their lack of legal right to volunteer, they would have no choice but to accept the decision, and adjust accordingly. That would free up time for other pursuits.

As an employee, it is their subsistence that is under threat. If the threat of losing their employment were to come about, they would at the minimum have to face the prospect of finding another job, and risk losing their income in the meanwhile. The remedy of an Employment Tribunal, if available to them, will incur costs and is of uncertain outcome. In many cases, there are caps on what can be recovered. That sets aside the emotional costs of pursuing a case, and the disruption to normal life that doing so would involve.

If I wanted to coerce you into a particular form of action, I would be a lot more confident of getting the result I wanted if I had leverage over your employment.

That is without considering the points raised by @Jamessquared about the simple impact of an employee knowing what the "right" outcome for their employer is, and @21B about the correct process being seen to be done - indeed, for the latter, failure to do so is a surefire way to provoke letters to the Charity Commission, with all the aggro that can cause.

 

I'm surpised that you're so dismissive of the loss of the opportunity to volunteer. As a working volunteer on two railways it would, for me, be a catastrophic life changing event. Given that it could be sudden without redress or a period of paid notice I'm not convinced that inability to volunteer is trivial when compared to loss of employment, as you appear to suggest.
There has to be some common sense here. It's quite common for charities to support heritage railway operating companies. If an interest in one's personal benefit from a role in the operating company automatically created a conflict of interest in the supporting charity there would be huge problems in finding enough trustees. Where would you draw the line? A director will typically be an employee of a non-charity and a trustee will often be a working volunteer for the same charity ( something that is rightly seen as a good thing). Is it being suggested that neither should be involved in decisions by their respective boards as they might be conflicted?

 

I am afraid I am with @35B . Whist a loss of being able to volunteer on a railway may not be what you want, in no way could I see it equate with losing paid employment. Management could "intimidate" both volunteers or paid staff, but having seen it in action the impact on paid staff is intense.
There are may other places you could volunteer (maybe not a railway), job hunting is not so easy.

 

I agree that common sense has to be applied. I just don't think that your analysis of relative conflict stands up to scrutiny, when considered objectively. It is absolutely not intended to suggest that the inability to volunteer might be inconsequential - other threads here have shown that such "dismissal" matters greatly.

Let's go back to first principles. The point about conflict of interest is that it ensures seemly governance of decisions where decision makers may be compromised in their ability to perform their duty as a director/trustee of A because of their role at B.

This then requires assessment in terms of the degree of conflict, and the significance of that conflict to the decision being made.

Where the purposes of A and B are aligned, it is generally likely to be sufficient that the conflict of interest is declared (see my example about PCC/Friends overlap). Some decisions will be material enough that this is insufficient, and the resolving the conflict will require stronger measures. The classic examples are either that the conflicted director/trustee(s) abstain from the vote, or even leave the room for the discussion. In the extreme, it may even be necessary to restrict access to papers because even the knowledge of details could be a problem

For a "family" of organisations, as is typical in heritage railways, the sensitivity will also vary depending on the structure. I would be much less concerned about a conflict within the NYMR structure, where the charity is at the apex, than I would at WSR, where there is no formal relationship between plc and Association.

Now let's go back to the context of this discussion - a decision about a charity funding a company to do some work. On the information available, there is reasonable doubt (to put it at its mildest) whether the decision is (a) within the Charity's articles and/or (b) legal. The amounts involved are highly material to the charity. And, insofar as we can tell, there is a substantial minority who oppose the decision made.

In that situation, the question of conflict of interest is absolutely relevant to the validity of the decision. With 9 voters and a simple majority requirement, a motion can be carried by a 5-4 vote. If 2 are subject to a conflict, there can be reasonable doubt as to whether such a 5-4 majority "for" would actually have been a 4-3 majority "against". And that is if you only require those conflicted to abstain - the "but what influence did the 2 bring" question may also arise, chipping away further at the credibility of the decision.

The rules are designed to guard against that kind of outcome, and to ensure that decisions are like Caesar's wife - beyond reproach.

The focus must therefore be on how boards are enabled to focus on their primary duty, which is to discharge the purpose of the charity or company in accordance with the law.

 

Tom

You have hit two nails on the head.

(1) Two of the Trustees are WSR plc employees. It is not clear that they recused themselves in any vote.

(2) There is no sign of preparatory work on the grants. The present WSR plc regime has ‘form’ for present fait accompli to what should be partner organisations.

I fear this one has more mileage in it.

Robin

 

I find it strange that all three trustees gave exactly the same reason for not wanting publicity.
That suggests to me some sort of enterprise at work.

a. Either they agreed that together, or
2. Someone told them to say that, either with an inducement or a threat.

 

Perhaps what this interesting exchange has indicated is that the nature of heritage railways means they are riven by varying degrees of inherent conflict. Some are more egregious than others but where, as is often the case, you have multiple corporate entities involved in running and supporting their railways the potential for conflict of duty in particular can be considerable. There may well be affiliated groups, such as those owning locos rolling entering into hire contracts with the operating company. If its directors and trustees also have positions of influence in such affiliated groups there’s an obvious potential conflict. I’ve even seen a situation where the chairman of the owning trust was also chairman of a rolling stock owning group hiring its stock to the railway. I’m not excusing improper behaviour by directors or trustees but a counsel of perfection may be unrealistic. In the complex world of heritage railway corporate structures it can be particularly challenging to get it right.