Good governance cannot be guaranteed, but it is high time that the foundation trust comes into its own in the legal form

As a provider sector we are reconciled to change, but organisational change always results in organisations in some form.

Unless the leaders of those organisations are prepared to take on unlimited personal liability, those organisations will have a legal form that limits the liability of its directors. 

The current legal forms for NHS provider organisations are NHS trusts and public benefit corporations: NHS foundation trusts.

Often FTs are described as an organisational model, but they are in fact nothing of the sort, they are a legal form. 

‘Foundation trusts are a legal form’

What does it mean to be an FT? It must have members, a council of governors and a unitary board of directors with whom the power lies to control and direct the organisation. 

A unitary board of directors is made up of executive and non-executive directors with a collective responsibility for effective corporate governance of the organisation. There are a few procedural and reporting requirements but basically, that is it. 

Corporate governance

The alleged inflexibility of “the FT model” is in fact a common misapprehension. Just like a public limited company or a company limited by guarantee, it is as flexible as its leaders, its commissioners and its regulators want it to be.

What is at stake in the current debate and what really matters is whether organisations are responsible for their own corporate governance or not and how well they demonstrate their accountability to those who depend on their services.

For clarity, by corporate governance I mean the ability of unitary boards of directors to:

  • set strategy;
  • control the organisation by supervising the work of the executive;
  • set organisational culture; and
  • do all of that in a way that allows the organisation to be held properly to account. 

This is a binary state of being; organisations are either responsible for their own corporate governance and the autonomy that is implicit in that, or they are not – shades of grey fall into the second category of an organisation not being responsible for its own governance.

‘The alleged inflexibility of “the FT model” is in fact a common misapprehension’

Why is that important? The unitary board is a tried, tested and for the most part successful means of delivering good corporate governance.

Good corporate governance provides a solid platform (but not a guarantee) for organisational success. It provides the right tools to lead and direct organisations and, crucially, it is very clear who is responsible and answerable for quality and performance: the buck stops with the board.  

Conversely, where organisations are not responsible for their own corporate governance, there is potential for an executive team to being pulled one way by the board and another by an external performance manager.

Executives don’t really have their work supervised by anyone and compliance - not leadership - becomes the name of the game.

Where lies the accountability?

And, accept it or not, performance managers are at least partly accountable for the outcomes, so where does the buck stop? 

In times of change, the need for good corporate governance remains central. If we want a solid platform for success, we should insist on a strong system of governance based on the tried and tested model of the unitary board leadership.

‘We would want to build in some sort of local accountability relationship’

If we want that organisation to be responsive to the people who use its services and embedded in the communities it serves, we would want to build in some sort of local accountability relationship.

In short, we would wish to construct something that looks very much like an FT.

Delivering new models of care will also require sound governance between organisations. Organisations that already have their own house in order will be better placed than their peers and are more likely to be fleet of foot to adapt as circumstances change.

Work with what we have

So rather than requiring a new legal form, the NHS Five Year Forward View cries out for the proper mobilisation of a tried and tested legal form to deliver effective change within and between organisations.  

One lesson we can learn from local government is not to be our own worst critic. Whenever there is a crisis in local government - and there have been many over the years - we never hear local authority leaderships castigating the model or speculating that local democracy has run its course despite relatively low voter turnouts. 

‘Foundation trust legal form allows for the probability of good governance’

Rather, they rally together to put their house in order and carry on the stronger for it. Perhaps the NHS provider sector can do the same.

This should be the time when the FT as a legal form comes into its own because, like the company limited by guarantee, it is an all purpose, all terrain vehicle. 

While no legal form guarantees good governance – only conscientious boards can do that – the FT legal form allows for the probability of good governance. We should support it.

John Coutts is governance adviser for NHS Providers

Topics