In the recent 15^th March 2011 issue of Third Sector I read a remarkable story (In the Chair: A smack of firm leadership). It concerned the closure of a charity Chaired by Ashley Mitchell (the Otto Schiff Housing Association) and his decision to do so without any external impetus. He decided to take this decision because, in his words, “Our first objective is to the victims of Nazi persecution, and that client group is dying off. In 10 to 15 years’ time, there will be none left, so we decided to give them as much help as possible immediately, by funding the charities that are best placed to help them.”

Few organisations I am aware of take such dramatic action without the “encouragement” of creditors and the inability to make ends meet. That Mitchell took this decision on his own is unusual; that he gave away the proceeds of the winding up to other charities is extraordinary. Most see it as their ultimate responsibility to keep their charity operating; there exists a blanket presumption that this is always the best thing to do from the perspective of beneficiaries–but is it?

I was once involved in a charity which was very successful at hoovering up money for a particular cause. It was, unfortunately, not cost effective when it came to service delivery. By remaining in existence it was actually doing more harm than good as it was taking in money which others could have used more effectively. Suggestions to outsource services to the more efficient charities were met with scorn. The notion that we were not putting beneficiaries first caused murderous and self-righteous rage.

Such blatant neglect of client interest by some charities will become increasingly hard to justify in a resource constrained environment. Boards should and will be challenged as to whether their continued existence is in the public interest and/or in the interest of their beneficiaries. Trustees are frequently unwilling to take on these questions. I have seen incredibly bright and competent individuals leave their brains at the door when they come to Trustee meetings. Mitchell speaks of how “trustees saw it as a networking thing and weren’t doing anything useful for the charity.” He replaced them.

Readers may rightly point out that the case of Holocaust survivors is an extreme and emotive one–and they would be right. Yet I have had personal experience with those who use even this client group to further their career and institutional aims, at the expense of those who have suffered greatly, and whose lives are shortly coming to an end.

Of course, the process of closure needs to take the interest of staff and other stakeholder groups into account and any charity taking this route needs to act properly. However, private sector firms which act in such disregard of core stakeholder interests (shareholders) find their leaders booted out or are closed down. It is right that charities meet a similar test, although unlike private firms their core stakeholders rarely have a vote–and few have an Ashley Mitchell.

First Published in Third Sector in March 2011.