Good Governance in Government Entities

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Good Governance in Government Entities
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 Boards role is to create the future of the
organisation, not just mind the shop. John
Carver
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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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Accountability

• Those you cant 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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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 Government Entities
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Structure

• Varies
• department
• statutory authority advisory or decision-making
• wholly-owned or partly-owned company

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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

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Structure

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

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Structure

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

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Accountability

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

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Accountability

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

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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

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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

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Strategy

• Corporate Plan 3 plus years lots of analysis
  and information
• Business Plan and Budget 1 year

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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
  Ministers staffers

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In Summary
Influence the right skill-mix Define who does
what Maintain a relationship with the
Minister Your checklist
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Good Governance in Government Entities

Governance Matters
governancematters.com.au