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Understanding Good Governance

Understanding Good Governance. 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.

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Understanding Good Governance

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  1. Understanding Good Governance Governance Matters Kate Costello

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

  3. 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.

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

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

  6. 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)

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

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

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

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

  11. 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)

  12. 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

  13. 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

  14. 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

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

  16. 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

  17. Board Member Knowledge • induction • management update sessions • expert reports • expert development sessions • Board and director • performance evaluation

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

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

  20. 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

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

  22. Understanding Good Governance Governance Matters governancematters.com.au

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