Good Governance in Government Entities Governance Matters Kate Costello

Effective Governance understand the role of the Board get the right skills and encourage the right behaviour introduce effective processes

Understand the Role of the Board Governance is what the Board does or should do to be a “value-adder” to the organisation rather than just a “cost-centre”. It is different from what management does or should do.

What is Governance? “The Board’s role is to create the future of the organisation, not just mind the shop”. John Carver

Monitoring and Supervision The Role of the Board Strategy Formulation Outward Looking Accountability Compliance Roles Appoint CEO Performance Roles Inward Looking Monitoring and Supervision Policy Making Past & Present Future *adapted from Tricker, RI: International Corporate Governance (1994) p149

Those you can’t say no to! Accountability Those you can’t say no to! the law and regulation constituent document or empowering legislation creditors (eg. bank; suppliers) other contractors (eg government funding; sponsors)

Those you need to listen to! Accountability Those you need to listen to! owners (shareholders; members; government) customers staff the community

Good Governance in Accountability “listening” to stakeholders risk management organisational culture

Strategy Formulation what is “Strategy”? – Michael Porter the gut, the head, the heart answer the hard questions

Good Governance in Strategy longer term strategic plan (with measures) aligned operational/business/annual plan (with measures) aligned budgets

Good Governance in Strategy dedicate some board meetings to strategic matters spend the first hour on a strategic issue reorganise the agenda (decision; discussion; noting)

Policy “I define policy as the value or perspective that underlies action. Of course that means everyone in the organisation makes policy including staff members, but boards must make the broadest and most inclusive policies in order to control the organisation. The trick is for the board to make distinctions between the types and sizes of policy, so that what is delegated is clear”. Carver J: Reinventing Your Board, P41

Good Governance in Policy Carver argues that the board only has one employee, the CEO. “The board will: instruct only the CEO view all organisational performance as that of the CEO view any organisational failure to comply with board policy as the failure of the CEO require that the CEO keep the organisational performance within policy criteria and restore it to this state should there be policy violations never in its official capacity, help the CEO manage” John Carver

Good Governance in Policy Matters reserved for the board Policy separated from minutes Board Manual

Monitoring and Supervision By strategic KPIs By annual KPIs By compliance with board policy By agreeing what information will come to the board, in what format

CEO and Succession “hire and fire” the CEO remunerate and reward assess performance plan for succession

Get the Right Skills size of the board board skill set committees the right ones? clear terms of reference? reviewed, or task forces? amend constituent document to make right

Board Member Knowledge induction management update sessions expert reports expert development sessions Board and director performance evaluation

Encourage the Right Behaviour Board Effectiveness Research Shey Newitt Compliant but not contributing: why Australian boards are being under-utilised

Working Relationships Chair – CEO relationship critical behaviour and teamwork a “living” Code of Conduct

Introduce Effective Processes calendar papers before meeting clear, concise, precise papers duration of meetings calibre of minutes plus action list receipt of minutes after meeting

Effective Governance understand the role of the Board get the right skills and encourage the right behaviour introduce effective processes

Good Governance in Government Entities

Structure Varies: department statutory authority – advisory or decision-making wholly-owned or partly-owned company

Structure Commonwealth and states have their own classifications nomenclature may be confusing: the entity called “the Board” the entity has a “board” often two “owners”: portfolio and shareholder ministers

Structure skill mix on board if nominees Chair/board to influence Minister to create the right skill–mix on the board conflicts may arise where board members appointed because of expertise from operating in the field

Structure Audit Committee – Auditor-General as auditor Remuneration Committee – where board sets remuneration of CEO and other senior executives other committees?

Legislative compliance: Accountability Legislative compliance: specific purpose legislation legislation applying to certain types of government entities legislation applying to all government entities

Accountability prescriptive content and timing of reporting and disclosure obligations triple bottom line reporting

Accountability relationship with Minister: department CE and Chair Formal charter (or MOU) clearly setting out role, responsibilities and relationships between department and entity (and its board) Ministerial direction: in writing; recorded in minutes; referenced in annual report

Strategy tension between financial and social objectives Chair must agree with Minister the long term objective of the government Statement of Corporate Intent – may contain high-level policy on, eg. asset acquisition, capital structure, accounting policies

Strategy Corporate Plan: 3 plus years – lots of analysis and information Business Plan and Budget: 1 year

Policy may be tied to government policy eg. purchasing and tendering grants for programs will require certain policies and processes but, entity needs the freedom to develop policies without interference from department or Minister’s staffers

In Summary Influence the right skill-mix Define who does what Maintain a relationship with the Minister Your checklist

Good Governance in Government Entities Governance Matters governancematters.com.au