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