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 “cost-
centre”.
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 Accountability Strategy

Looking Formulation

Compliance Appoint CEO Performance

Roles Roles

Inward
Looking Monitoring and
Policy Making
Supervision

Past & Present 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 under-
utilised
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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