Why embrace Good Governance

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Why embrace Good Governance?

• Victorian TAFE Association - 2 June 2002, Wodonga
  Anne Dalton, Partner

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Good Governance

• WHAT?
• do we mean by Corporate Governance?
• Corporate Governance in the public sector.
• what are the basic principles?
• WHY?
• does it matter?

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Good Governance

• Not a new concept
• Definitions many and varied

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Good Governance

• Processes by which organisations directed,
  controlled and held to account
• Authority, accountability, stewardship,
  leadership, direction and control
• Governance not management

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Good Governance

• Ira Millsteins definition the necessary
  balancing of corporateaccountability with
  innovation and entrepreneurial risk taking

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Good Governance

• Management
• day-to-day conduct - to achieve the
  organisations objectives
• Governance
• stewardship - responsibility to set strategic
  course, monitor progress, oversee and guide the
  organisation

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Good Governance

• Importance of link between corporate governance
  practices and corporate performance
• Emphasis on performance - not conformance - one
  size does not fit all
• Commitment to the outcomes of corporate practices
  rather than simply a focus on the process of
  compliance

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Good Governance The 4 Pillars
ACCOUNTABILITY
DISCLOSURE
Audit Independence
StrategySetting and Monitoring
Directors Duties
Board Composition
Conflicts of Interest
Management Information
RemunerationDirectors and Executives
Legislative requirement and Parliamentary Accounta
bility
Directors Inductionand Performance review
Board Accessto IndependentAdvice
Board Committees
TRANSPARENCY
INDEPENDENCE
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Good Governance

• Corporate Governance in the Public Sector
• Existence of Parliament, Ministers, Boards and
  CEOs creates an elaborate set of relationships in
  the Public Sector
• Their respective powers, roles and
  responsibilities of each party results in greater
  management complexity in terms of stewardship and
  accountability that is the private sector
• Level of tension between business imperatives and
  legislative requirements. Board must manage
  these tensions in best interests of the
  organisation

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Good Governance

• Structures will only work if individual
  Councillors ensure that they exercise the Power
  of One
• Duty of care and diligence - s 180(1)
• Care and diligence of a reasonable director in
  the companys circumstances occupying the same
  office with the same responsibilities

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Good Governance

• Duty of Good Faith - s 181
• Care and diligence of a reasonable director in
  the organisations circumstances occupying the
  same office with the same responsibilities

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Good Governance

• Duty of Good Faith - s 181
• Must act in good faith in best interests of the
  organisation and for a proper purpose

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Good Governance

• Not to improperly use information and position -
  s 181, s 182, s 183, s 184
• To disclose material personal interests - s 191

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Good Governance

• Good Faith
• loyalty, honesty in preferring interests of
  corporation to extraneous or ulterior interests
• Proper Purpose
• main goal of decision was within constitutional,
  legislative design of power exercised

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Good Governance

• Best Interests
• path taken is best chosen at the time for
  corporation (ie existing and future stakeholders)
• No Personal Interest
• free from personal motivation, hope, gain, loss
  or duty or loyalty to another corporation

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Good Governance

• Major beyond process governance issues
• What constitutes necessary Board information as
  to past/future performance?
• What constitutes sufficient Board education?
• Access to consultants
• Access to middle managers

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Good Governance

• Why does governance matter?
• Board has stewardship for stakeholders - ie
  government structures and community
• Link between long term corporate survival and
  effective corporate governance practices
• Public asking where were the directors/Board?

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Good Governance

• Effective Governance - How?
• One size does not fit all
• Directors ask difficult questions
• Beware dominant director - especially if
  executive director
• Audit committee - robust, independent,
  understand its role, report fully to Board

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Good Governance

• Effective Governance - How?
• Board papers effectively presented
• Effective risk management systems, regular
  reports on operational, legal, financial,
  occupational health and safety risks

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Good Governance

• Effective Governance - How?
• Stakeholders expect greater transparency,
  accountability
• Consider need to change external auditors
  regularly to avoid capture

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Good Governance

• Never appoint former auditor/director
• Audit committee - made up of external directors
• Audit committee - appoint, interview auditor
  without executives present

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Good Governance

• Why embrace good governance?
• Puts you in the best position when you are called
  to account by stakeholders
• Defensive Tactic
• Good governance gives you the framework for
  forward planning and setting the strategic
  direction of the organisation - going forward
• Advancing into the Future