Stronger VPSC conflict of interest rules for board directors

By David Donaldson

March 30, 2016

The Victorian Public Sector Commission has released a new Code of Conduct for Directors of Victorian Public Sector Entities, providing strengthened rules on managing conflicts of interest for directors of everything from school boards to public hospitals and cemetery trusts.

In the first major review of the code since 2006, the VPSC has updated the code to more clearly outline the individual and collective responsibilities of directors. The review was conducted in consultation with departmental governance experts, directors and the Australian Institute of Company Directors.

” … public entities ultimately must rely on the accountability of individuals for their own actions … ”

Victorian public sector commissioner Belinda Clark explained that experience has shown that directors play a significant role in moulding the behaviours and attitudes of the staff within these organisations.

“They lead the organisation by setting the strategic direction, managing risks and working cooperatively with the community, relevant ministers and departments,” Clark said. “Directors need to exemplify the values expected of everyone who works in the public sector.”

One of the cornerstones of public service is maintaining citizens’ trust, argues the commissioner.

“Public sector employees are expected to preserve the public interest through acting ethically, managing their organisations efficiently and effectively, and acting openly and transparently,” she said.

“As it is not possible to provide a detailed rule for every conceivable situation, public entities ultimately must rely on the accountability of individuals for their own actions and behaviour.”

The code applies to every one of Victoria’s more than 3000 public entities, which range from school councils, crown land committees of management, cemetery trusts, public hospitals, water corporations, alpine resorts to advisory committees.

The document complements other guidance material the commission has published to help directors fulfil their roles, such as Welcome to the board.

What’s changed and why it matters

The idea behind the update is that the code should give directors practical advice on how they can adhere to the public sector values and their duties under the Act. The original version was very brief at just two pages plus non-mandatory guidance notes. The new one has strengthened the parts that are binding on directors, while hiving off non-mandatory guidance material into another document.

It explains in greater detail than before how to manage conflicts of interest, stipulating directors with a material conflict of interest in a matter must leave the room while it is being discussed.

At the beginning of meetings, directors must confirm their entries in the register of interests are complete and correct, and disclose any interests that relate to particular agenda items. The board will have to notify the minister in writing of any breach of process.

The update comes as Victorian Secretaries Board, through the VPSC, reviews the guidance given to departments for managing breaches of the Code of Conduct for Victorian Public Sector Employees 2015, as well as general policies and procedures for dealing with conflicts of interest, following the revelations of the Independent Broad-based Anti-corruption Commission’s inquiry into the Victorian Education Department’s Ultranet project.

The VPSC released a new edition of the code of conduct for public servants last year. This updated guide brought an increased focus on ensuring the values behind the rules are understood and internalised, rather than simply offering extensive prescriptions, recognising that wrongdoers can often exploit grey areas in the rules, despite knowing their actions are wrong.

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