When governance arrangements stop working

Governance failure rarely arrives without warning. The signs are usually there well before a crisis: unclear authority, weak challenge, poor information, unresolved conflicts, outdated rules or a board that has stopped examining its own performance.

Keeping governance arrangements adequate and fit for purpose is a core part of governing well. Boards should already be testing whether their structures, policies, delegations and ways of working continue to support effective oversight and decision-making.

These weaknesses can sit quietly for years. They become visible when pressure rises, relationships deteriorate or the organisation faces a decision its governance arrangements were never designed to handle.

Recent reviews and headlines involving sport, charities and other member-based organisations have shown how quickly trust can be damaged when roles, accountability and decision-making are unclear. Strong commitment to a cause cannot compensate for governance arrangements that no longer work.

Registered charities now have a formal prompt to look closely at those arrangements. Under section 42G of the Charities Act 2005, they must review their governance procedures at least once every three years. For charities already registered when the requirement came into force, the first review should be completed by October 2026.

The review is self-directed and can be scaled to suit the organisation. That flexibility recognises the diversity of the sector. A smaller charity may use a focused board discussion, while a larger or more complex organisation may need a more formal process. Trustees are responsible for deciding what level of review is appropriate and how deeply they need to look.

Governance failures are rarely about one missing policy

Governance reviews and research into governance capability show organisational failures often share familiar weaknesses. These include inadequate oversight, weak scrutiny of management, groupthink, conflicts of interest, poor risk assessment and a failure to respond to warning signs.

The UK Post Office scandal is an extreme example, yet its governance lessons are widely relevant. It showed what can happen when assurance is accepted too readily, challenge is suppressed and a board loses sight of the people affected by its decisions. The consequences were devastating.

Closer to home, the Mainzeal judgment reinforced directors’ responsibilities to monitor financial health, seek advice and respond when circumstances change. It also highlighted the importance of varied skills, succession planning and continuing development.

These cases underline a broader point. Governance lives in the way a board uses information, exercises judgement, manages relationships and makes decisions. A current trust deed and a full policy folder provide little protection if authority is unclear, challenge is unwelcome or warning signs are ignored.

A review that concentrates only on rules, records and meeting processes may miss the weaknesses most likely to cause harm.  Trustees also need to examine how they challenge, exercise judgement, manage conflicts and respond to warning signs.

The new IoD guide, Governance procedure reviews: a practical guide for charitable entities, helps trustees take that wider view. It draws on the IoD’s Four Pillars of Governance Best Practice: determining purpose, an effective governance culture, holding to account and effective compliance.

What a meaningful review can reveal

A well-run review can give trustees a clearer view of the organisation they now govern.

Charities change over time. Services expand, funding conditions shift, new partnerships develop and organisations take on staff, assets or responsibilities that were never contemplated when their rules were written. A review creates space to consider whether governance arrangements have kept pace and whether the charity’s time, money and attention remain aligned with its purpose.

It can also surface issues that routine board business leaves hidden. A delegation may no longer reflect how decisions are made. Responsibilities that once seemed clear may have blurred as the organisation grew. Long-standing board habits may be limiting challenge, slowing decisions or drawing trustees too far into operations.

The point is to test those habits before they become embedded. That requires trustees to ask whether their arrangements are genuinely working and to hear answers that may be uncomfortable.

Clearer authority can improve decision-making. Better information can sharpen oversight. A more deliberate board work programme can create room for strategy, risk and the future rather than allowing urgent operational matters to dominate.

The IoD’s 2025 Director Sentiment Survey Not-for-profit insights shows why culture also deserves attention. While 81.3% of not-for-profit directors described their board culture as inclusive, only 65.4% said their board discusses or monitors organisational culture.

Boards may feel confident about their culture without regularly testing how it works when views differ, relationships are strained or difficult choices need to be made.

The Director Sentiment Survey also found only 42.8% of not-for-profit boards undertake formal performance evaluations at least every two years. A governance procedure review is different from a board evaluation, but it may expose issues that warrant deeper examination, particularly where board practice has evolved without being deliberately reviewed. Boards can use the process to consider whether a broader review of board performance, culture, capability or composition is also needed.

 The review should also confirm that policies, records and reporting obligations are current. The board should be able to show what it reviewed, what it concluded and what actions it agreed to take.

Some reviews will confirm that the charity’s arrangements remain sound. Others will uncover outdated rules, unclear authority, weak reporting or practices that have become normal without ever being tested.

Both outcomes are useful. Trustees gain greater confidence in what is working, a clearer view of what needs attention and a stronger basis for governing the organisation through its next stage of development.

The new requirement creates an opportunity to examine governance before pressure does it for you.