Dispute resolution in charities - could mediation be the answer?
It is becoming more common in the current climate to hear questions on the risks of litigation amongst colleagues. The cost of legal action compared can often come close to matching or exceeding the values involved and hence eradicate the consideration of the ‘principle’ of the issue, though the organisations reputation is an important factor in a number if dispute.
For the managers and trustees of charities the decision on whether to proceed with legal action can be tougher than that of those in the corporate world. In the corporate world, taking into consideration the commercial reality of the issues can lead to an answer. However charities must consider the use of publically raised monies and their obligation to attain maximum value for the charity. Pursuing some sources of income through a legal route could damage a charities reputation by branding them as ‘greedy’ or ‘grasping’. However this must be judged with the risk of legal costs in following a possible claim and the natural delay, uncertainty and negative publicity that results.
In a recent case the RSPCA took a disputed £2 million bequest claim to court and lost. This lead people to accuse the RSPCA of ‘grasping’ whilst others questioned the charities integrity. However it can also be argued that the officers of the charity had a duty to pursue money that they believed to be legally theirs.
On reflection of the case there are justified and serious grounds to decide whether £1.2 million in legal costs could have been saved and the possibility of some benefit going to the charity if, at an early stage, mediation had been attempted. There is a general opinion amongst experienced mediators that probate mediation is the most challenging of circumstances to deal with.
Disputes also commonly occur in the course of negotiating mergers or collaborating charities. Areas of savings and gains are usually easily agreed and self evident, however decisions such as whose FD should take control or which head office should be used are not and can often lead to dispute. There can also be the difference between cultures at each firm/charity. With neither being definitively right or wrong, and are usually both accepted by customers/beneficiaries.
Yet another potential problem is the competing ego’s of each chief executive, chair of governors and trustees. It is believed that mediation could help by moving the spotlight away from pure personalities and towards potential outcomes.
Due to changing times and the resultant increase in ICAEW members who find themselves advising clients in dispute resolution on a more regular basis, it is advised that firms should review their CPD activities and ensure that they are sufficiently trained to deal with the process and conclude the mediation in a legally sustainable way.
Mediation is a service that chartered accountants can offer, and one which the ICAEW does offer. It is advised that ICAEW members refer to accredited chartered accountant colleagues and consider seeking accreditation themselves. In doing so the most up to date mediation techniques are used which benefits all as the best European mediation agreements are there for the benefit and protection of the practitioner and the clients.
For more information on this subject, please refer to the ICAEW website.
Date: 21st February, 2011
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