Good Governance in Government Entities Governance Matters Kate Costello.

Good Governance in Government Entities

Governance Matters

Kate Costello

• understand the role of the Board

• get the right skills and encourage the right behaviour

• introduce effective processes

Effective Governance

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.

Understand the Role of the Board

“The Board’s role is to create the future of the

organisation, not just mind the shop”.

John Carver

What is Governance?

The Role of the Board

Accountability Strategy Formulatio

n

Compliance

Roles

Appoint CEO Performance Roles

Monitoring and Supervision

Policy Making

Outward Looking

Inward Looking

Past & Present Future*adapted from Tricker, RI: International Corporate Governance (1994)

p149

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)

Accountability

Those you need to listen to!

• owners (shareholders; members; government)• customers• staff• the community

Accountability

• “listening” to stakeholders

• risk management• organisational culture

Good Governance in Accountability

• what is “Strategy”? – Michael Porter

• the gut, the head, the heart

• answer the hard questions

Strategy Formulation

• 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)

Good Governance in Strategy

“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

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

Good Governance in Policy

• By strategic KPIs• By annual KPIs• By compliance with board

policy• By agreeing what information

will come to the board, in what

format

Monitoring and Supervision

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

CEO and Succession

• 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

Get the Right Skills

• induction • management update

sessions• expert reports• expert development

sessions• Board and director performance evaluation

Board Member Knowledge

Encourage the Right Behaviour

Board Effectiveness Research

Shey NewittCompliant but not contributing: why Australian boards are being under-utilised

• Chair – CEO relationship critical

• behaviour and teamwork• a “living” Code of Conduct

Working Relationships

• calendar• papers before meeting• clear, concise, precise

papers• duration of meetings• calibre of minutes plus

action list• receipt of minutes after

meeting

Introduce Effective Processes

• understand the role of the Board

• get the right skills and encourage the right behaviour

• introduce effective processes

Effective Governance

Good Governance in Government Entities

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?

Structure

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

Accountability

• 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

Strategy

• 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

Policy

Influence the right skill-mix

Define who does what

Maintain a relationship with the Minister

Your checklist

In Summary

Good Governance in Government Entities

Governance Matters

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