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Good Governance in Government Entities Governance Matters Kate Costello.

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1 Good Governance in Government Entities Governance Matters Kate Costello

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

3 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

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

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

6 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

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

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

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

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

11 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

12 “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

13 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

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

15 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

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

17 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

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

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

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

21 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

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

23 Good Governance in Government Entities

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

25 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

26 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

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

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

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

30 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

31 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

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

33 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

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

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


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