The Regulation of Social Housing in Scotland
Payments and benefits
5.19 For over 25 years the RSL sector has been subject to legislation which has explicitly restricted the payments and benefits which governing body members and employees could receive. The Act does not legislate about payments and benefits so it will be for each RSL to decide if, and how, it wants to manage payments and benefits to its governing body members, staff, and their close relatives.
5.20 We consider the potential payment of governing body members to be a mechanism to enable RSLs to have the right people with the right skills on the governing body. We will require an RSL which makes such payments to do so within a clear policy framework to make sure it acts with transparency, honesty and propriety and avoids any public perception of improper conduct. Where an RSL has subsidiaries it should ensure any payments to subsidiary governing body members are included in the policy. Charitable RSLs will also need to be mindful of complying with the restrictions on payments to charity trustees.
5.21 We have reflected our requirements about payments to governing body members in the constitutional standards. We will require any RSL intending to pay its governing body members to take account of independent guidance in setting payment amounts and linking payments to specified duties. There must also be a clear process for assessing performance in carrying out these duties. The RSL must also publish details of all governing body payments in its annual accounts.
5.22 Employees can become executive members of the governing body (if the RSL’s constitution permits that). In such a case, we would require these executive governing body members to be in the minority, not to hold any office and not to be able to form a quorum. The Chair must always be a non-executive member. Executive members of the governing body should not receive any additional payment for their governing body role over and above what they are entitled to under their contract of employment.
5.23 Governing body payments and employee remuneration are matters for the governing body. But RSLs use significant sums of taxpayer money and this comes with responsibilities around restraint and economic effectiveness. We will hold an RSL to account and may take regulatory action if we consider that an RSL has made excessive payments to either its governing body members or employees in comparison to industry standards and set scales.
5.24 We will require any concerns raised by auditors to an RSL about its approach to this area to be treated as “of material significance” in terms of section 72 of the Act and reported to us.
Question 18: Do you agree with the requirements set out in our guidance on RSL payments and benefits to governing body members and employees? Do you have any additional comments on this area?
5.25 The people on the governing body, and the skills and knowledge they collectively have, are the most significant contributors to the good governance of the RSL. Therefore it is important that the governing body actively manages its membership – who is recruited and selected to be on the governing body – so that governance is as effective as it can be.
5.26 Having a mix of established and new members on the governing body is a key component in achieving good governance because the RSL benefits from both experience and new ideas. The in-depth knowledge and understanding of experienced members is vital. However, new members can bring an essential objective challenge to familiar practices and thinking. We consider that the provisions for governing body renewal set out in the UK Corporate Governance Code offer the best approach. We will require RSLs to ensure their constitutions have specified maximum terms of three years, for individual (non-executive) governing body members, normally subject to a maximum continuous period of governing body service of six years. Any term beyond the maximum six years for a non-executive member would need to be subject to a rigorous review and should take into account the need for progressive refreshing of the governing body. RSL constitutions must ensure no governing body member remains beyond three three-year terms, that is, for nine continuous years.
5.27 RSLs will need to plan to ensure orderly succession to governing body places to maintain an appropriate balance of skills and experience on the governing body and to ensure progressive refreshing of the governing body. We will require RSLs to ensure their constitution allows for this renewal of the governing body membership and complies with our proposed constitutional standards by 1 April 2015; this will give RSLs three years from the standards taking statutory force to amend their constitutions where necessary.
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