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• understand the role of the Board
• get the right skills and encourage the right behaviour
• introduce effective processes
Effective Governance
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
“The Board’s role is to create the future of the
organisation, not just mind the shop”.
John Carver
What is Governance?
The Role of the Board
Accountability Strategy Formulatio
n
Compliance
Roles
Appoint CEO Performance Roles
Monitoring and Supervision
Policy Making
Outward Looking
Inward Looking
Past & Present Future*adapted from Tricker, RI: International Corporate Governance (1994)
p149
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
Accountability
• “listening” to stakeholders
• risk management• organisational culture
Good Governance in Accountability
• what is “Strategy”? – Michael Porter
• the gut, the head, the heart
• answer the hard questions
Strategy Formulation
• 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)
Good Governance in Strategy
“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
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
Good Governance in Policy
• 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
• “hire and fire” the CEO• remunerate and reward• assess performance• plan for succession
CEO and Succession
• 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
• induction • management update
sessions• expert reports• expert development
sessions• Board and director performance evaluation
Board Member Knowledge
Encourage the Right Behaviour
Board Effectiveness Research
Shey NewittCompliant but not contributing: why Australian boards are being under-utilised
• Chair – CEO relationship critical
• behaviour and teamwork• a “living” Code of Conduct
Working Relationships
• 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
• understand the role of the Board
• get the right skills and encourage the right behaviour
• introduce effective processes
Effective Governance
• size of board; alternates• “fit”: skill set; appointed or
elected directors – written notification of duties
• letters of appointment and position descriptions
Structure and Skills
• communication from, and to, members
• relationship with APRA
• Code of Conduct – Section 52 SIS; fiduciary obligations
• reports on governance
Accountability
• Fund-specific investment philosophy drives investment objectives and strategies
• measurable objectives for each investment option
• time on investment matters
Strategy
• who makes investment decisions?
• assessing, rewarding and terminating investment managers
Strategy
• matters reserved
• centralise all board-endorsed policies
• outsourcing – what?; service standard agreements; auditing; reporting to board
Policy
• risk management integrated in strategic planning process
• risk management program
• business continuity plan
Policy
• of outsourced service providers
• of objectives for investment options
• of risk management program and follow-up of breaches
Monitoring and Supervision
• performance management
• annual succession planning including for nominated, critical positions
CEO and Succession
• the right chair
• succession planning for the chair
• performance evaluation
Leadership and Teamwork
• duration and timing
• format for submissions
• annual calendar
• meeting without management
Meetings
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