The revised CUC Code introduces tighter rules on board composition across three areas: tenure, skills and remuneration. On remuneration, the revised Code takes a more open position than the 2020 Code - but for charitable higher education institutions, charity law constraints remain firmly in place and cannot be overridden by the Code's permissive framing.

How did the 2020 Code address board composition and tenure?

The 2020 Code required a majority of independent members, addressed conflicts of interest and set out general expectations on the skills and diversity of the board. It included a nine-year total tenure expectation but without a prescribed maximum term per appointment.

Fixed term limits, skills audits and collective academic literacy requirements

Under the revised Code, the Board must have a majority of independent members, including the Chair. Non-executive board members must be appointed on limited terms of office of no more than four years, and their total terms of office should not be more than nine years. When board members' current terms of office expire before a total of nine years, term extension should not be automatic and the Board should consciously assess whether the board members' skills, experience, independence, character and performance continue to make them effective in their role.

Succession planning and board refreshment

The Board should plan the terms of office of its members to ensure both a mix of new and more experienced board members and to avoid the disruption caused by many board members leaving the Board at the same time.

Board members must have the character, capability and capacity, and dedicate sufficient time, to discharge their responsibilities fully as members of a unitary Board. The size of the Board should not be so large as to discourage challenge, discussion and debate.

Skills reviews and appointment processes

Boards must regularly review size, composition and skills against strategy and risks (including capability) to effectively and independently scrutinise academic assurance (including academic understanding) regulatory insight, and familiarity with student learning and research environments, without the Board being reliant on a single independent member to do so. 

Appointments should be led by the independent board members and subject to a formal, rigorous and transparent procedure, with fit-and-proper due diligence and EDI objectives.

The Board should constitute a Nominations Committee, often chaired by the Chair of the Board, with a majority of independent board members. The Chair of the Board/Head of Institution should not form part of the Committee when the Committee is selecting their successor.

Delegation and collective responsibility

On delegation, the Board may delegate authority to committees, the Chair, the Head of Institution and other members of the executive. Delegation must be clearly defined through formal schemes of delegation or terms of reference which set out the scope of authority, responsibilities and reporting arrangements. 

The Board must remain collectively responsible for all decisions taken in its name. Core responsibilities – including strategy, appointing the Head of Institution and Chair, and stewardship of the institution's mission and resources – are fundamental responsibilities of the Board and should not be delegated.

Board member remuneration: An open position, but a careful one

On remuneration, the revised Code provides that the Board should agree its approach to the remuneration of board members, with a clearly stated rationale which assesses the approach against the Board's ability to recruit suitably engaged, high-calibre and diverse board members with the skills and experience needed. 

Where board members are remunerated, the Board should adopt a clear policy, including managing any conflicts of interest in the setting of remuneration levels, ensuring that the necessary legal powers have been obtained. Boards should actively consider any potential adverse implications of their decisions around remuneration for overall effectiveness, and how these can be mitigated.

The revised Code's position on board member remuneration - permitting remuneration where the Board agrees a clearly stated rationale and adopts a clear policy - is more open than the 2020 Code's approach. 

The arguments in favour of remuneration are relatively well known in the charities and higher education sectors: 

• That it can widen the talent pool and attract high-calibre independent members who might otherwise be unable to afford the time commitment; 

• That it may improve board diversity by removing a barrier for those without the financial flexibility to volunteer; 

• That the significantly increased expectations and responsibilities under the Revised Code reinforce the case for compensation; 

• And that other sectors – including NHS trusts and the senior lay member role in Scottish higher education under the Higher Education Governance (Scotland) Act 2016 – operate with remunerated board members without apparent detriment to the quality of governance.

However, there are also substantial reasons for caution, and several commentators on the revised Code have expressed concern that the Code's framing risks normalising remuneration as the default position.

The charity law position

For those institutions that are charities (i.e. a significant proportion of CUC members) the interaction between the Code's open position on remuneration and charity law is critical. Under the Charities Act 2011, trustee remuneration is generally prohibited without express authority in the governing document or Charity Commission consent. 

The Code's openness on this question does not modify or override charity law. It is therefore not open to a charitable higher education institution to resolve simply to remunerate its board members without first confirming that the governing document expressly permits trustee remuneration or obtaining Charity Commission consent under section 185 of the Charities Act 2011. Absent one of those two conditions being satisfied, any payment to a board member in their capacity as a trustee would be unlawful regardless of the rationale adopted by the Board.

The published revised Code adds the important requirement that, where board members are remunerated, the Board must ensure "that the necessary legal powers have been obtained". This is a welcome addition that acknowledges the legal constraint, though it does so without spelling out the underlying charity law position. In our view, the Charity Commission's position – that the principle that trustees should be volunteers and unpaid is important to maintain public confidence in charities – remains the starting point for charitable HEIs.

Practical steps for charitable HEIs considering remuneration

The practical steps that any charitable institution considering board member remuneration should take are:

1. Obtain and review the governing document to establish whether express authority to remunerate exists.
2. Take independent legal advice on whether a Charity Commission application for authorisation is required.
3. Ensure that any conflicts of interest in the setting of remuneration levels are managed rigorously and documented.
4. Assess carefully whether the reputational and governance boundary risks identified by commentators outweigh the recruitment or diversity benefits in the institution's specific circumstances. 

In most cases, we would expect this analysis to lead to continued non-remuneration, consistent with the sector norm and the Charity Commission's general position.

What do the new composition and remuneration provisions require in practice?

The explicit four-year maximum per term, the prohibition on automatic renewal, the requirement for active assessment before any extension, and the collective academic literacy requirement (without reliance on a single member) are all new. 

Boards with ageing compositions or narrow skills profiles will need to undertake skills audits and plan board refreshment. The expectation of sufficient collective academic literacy, rather than reliance on a single member, is a particularly notable addition that may require targeted recruitment.

Institutions should note the addition of the requirement to secure 'the necessary legal powers' before remunerating board members, which is a practical safeguard that charitable institutions in particular must take seriously. 

The provisions on succession planning for board terms, the Nominations Committee composition requirements and the exclusion of incumbents from selecting their successors are all areas that boards should review against current practice.