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Good Governance in Superannuation Funds
Governance Matters Kate Costello
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Effective Governance understand the role of the Board
get the right skills and encourage the right behaviour introduce effective processes
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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.
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What is Governance? “The Board’s role is to create the future of the organisation, not just mind the shop”. John Carver
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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
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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)
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Those you need to listen to!
Accountability Those you need to listen to! owners (shareholders; members; government) customers staff the community
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Good Governance in Accountability
“listening” to stakeholders risk management organisational culture
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Strategy Formulation what is “Strategy”? – Michael Porter
the gut, the head, the heart answer the hard questions
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Good Governance in Strategy
longer term strategic plan (with measures) aligned operational/business/annual plan (with measures) aligned budgets
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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)
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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
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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
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Good Governance in Policy
Matters reserved for the board Policy separated from minutes Board Manual
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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
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CEO and Succession “hire and fire” the CEO remunerate and reward
assess performance plan for succession
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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
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Board Member Knowledge
induction management update sessions expert reports expert development sessions Board and director performance evaluation
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Encourage the Right Behaviour Board Effectiveness Research
Shey Newitt Compliant but not contributing: why Australian boards are being under-utilised
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Working Relationships
Chair – CEO relationship critical behaviour and teamwork a “living” Code of Conduct
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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
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Effective Governance understand the role of the Board
get the right skills and encourage the right behaviour introduce effective processes
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Good Governance in Superannuation Funds
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Structure and Skills size of board; alternates
“fit”: skill set; appointed or elected directors – written notification of duties letters of appointment and position descriptions
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Structure and Skills what committees? the right committees
committee skill sets
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Accountability communication from, and to, members
relationship with APRA Code of Conduct – Section 52 SIS; fiduciary obligations reports on governance
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Strategy a true differentiation? mergers enough time on strategy
longer term plan
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Strategy Fund-specific investment philosophy drives investment objectives and strategies measurable objectives for each investment option time on investment matters
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Strategy who makes investment decisions?
assessing, rewarding and terminating investment managers
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Policy matters reserved centralise all board-endorsed policies
outsourcing – what?; service standard agreements; auditing; reporting to board
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Policy risk management integrated in strategic planning process
risk management program business continuity plan
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Monitoring and Supervision
of outsourced service providers of objectives for investment options of risk management program and follow-up of breaches
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CEO and Succession performance management
annual succession planning including for nominated, critical positions
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Leadership and Teamwork
the right chair succession planning for the chair performance evaluation
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Meetings duration and timing format for submissions annual calendar
meeting without management
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In Summary The right directors and chair A strategic view
The right processes Your checklist
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Understanding Good Governance in Superannuation Funds
Governance Matters governancematters.com.au
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