New principles guide for public sector entity boards

By David Donaldson

May 24, 2016

When it comes to public sector boards, there’s no single legal structure and no single model of good governance.

But there are common principles board members can incorporate into their role, and a new guide published by the Governance Institute of Australia, Principles of governance for boards of public sector entities, sets out what they should consider.

Public sector organisations with boards typically include statutory bodies, including universities, and commercialised government-owned entities, including Commonwealth and state-owned corporations, government business enterprises and government trading enterprises.

The key thing to keep in mind is that good governance is not an end in itself, but a means to effectively achieving the goals of the organisation.

Bolstering public trust and confidence in the entity sits at the core of the roles and responsibilities of directors on public sector boards, demanding a diligent and astute approach often quite different from the private sector, the document argues.

A principles-based approach can help improve whole-of-government public sector entity governance practice, the Governance Institute believes:

There are varying practices and different governance models within which public sector entities operate across jurisdictions. While we recognise the measures already in place to develop governance guidelines across the country, we believe that through the design of an overarching governance framework in the form of principles, whole-of-government governance practice in public sector entities can be improved. In turn, better governance practices can lead to improvements in behaviour, culture, innovation, productivity, performance, efficiency and effectiveness.

Importantly, a whole-of-government focus does not detract from those governance principles already in place in various jurisdictions, or seek to reinvent the good work that they have undertaken. Rather, our focus is on harnessing and developing common governance principles to enable jurisdictional collaboration, cohesiveness and consistency focused on community wellbeing and prosperity while allowing the Commonwealth, states and territories to flexibly tailor directions and actions to align to each situation.

Seven principles for good governance

The guide offers seven broad principles, broken down into sub-points:

Clarify and document the public sector entity’s relationship with the government.

  • Clarify and document the accountability of the public sector entity to the government.
  • Clarify and document the public sector entity’s relationship with the minister(s).
  • Define the board’s oversight responsibilities.
  • Define and record delegations of authority.

Ensure that the board adds value to the community and other stakeholders.

  • Clarify the long-term strategy of the public sector entity.
  • Document the processes which inform the structure and composition of the board.
  • Develop processes to evaluate the board and management.
  • Clarify how board remuneration is determined and reviewed.

Embed ethical behaviour and integrity and promote community wellbeing and trust.

  • Develop, document and implement an ethical framework using appropriate codes, policies and practices.
  • Develop structured processes to monitor conduct and professional behaviour.

Oversee effective stewardship of resources.

  • Develop rigorous processes to manage and safeguard the organisation’s resources.
  • Develop performance measures and processes to monitor them.
  • Manage and safeguard knowledge and information resources.
  • Establish effective audit arrangements.

Protect the public interest through effective risk management.

  • Establish an appropriate risk management framework/
  • Establish an oversight function.

Engage openly and honestly with stakeholders.

  • Define the stakeholders and the organisation’s strategy in regard to engagement.
  • Develop effective communication with stakeholders.
  • Develop a framework for handling grievances and whistleblowers.

Make timely and balanced disclosure.

  • Document the organisation’s reporting requirements to government.
  • Clarify access to information from the entity.
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