Advocacy: Setting the Standard

The AICD is undertaking a review of its Good Governance Principles and Guidance for Not-for-Profit Organisations, reports Louise Petschler MAICD.

Originally released in 2013, Good Governance Principles and Guidance for Not-for-Profit Organisations sets out 10 principles the AICD considers to be the fundamental principles of good governance for not-for-profit (NFP) organisations. Each of the principles is supported by guidance on how they can be applied in practice and provides commentary on the role of boards and directors in implementing them.

The review has three main aims:

• Refine the principles to reflect current practice of good governance, informed by an up-to-date understanding of the operational context of the NFP sector;
• Introduce descriptions of good governance in the form of “supporting practices”;
• Identify and provide additional resources to assist NFPs to apply the principles in their unique circumstances, such as further guidance, case studies and templates.

The most significant proposed change to the principles is the introduction of “supporting practices” — which describe specific behaviours of organisations that are meeting the principles. Each individual principle will include up to five supporting practices.

The supporting practices are drafted in a broad way to provide flexibility for users to determine how to interpret and apply them within their own unique circumstances. This approach reflects consistent feedback that the principles should be applicable to both small and large NFPs, and should not apply a one-size-fits all approach to governance.

The AICD also proposes minor changes to the 10 principles themselves through rearranging the topics and refining their descriptions to ensure they are consistent, logical and clear. Further guidance will be provided to assist users to understand and apply the principles, including case studies.

The AICD will release a consultation white paper inviting written submissions from interested parties. Consultation began on 17 April and will be open until mid-June. The AICD will also conduct face-to-face consultations with focus groups, and AICD policy committees and Division Councils.

A revised edition of the principles is scheduled for release later this year. Contact AICD senior policy advisor Lucas Ryan GAICD on (02) 8247 6671 or email here for further information.

WA local government

The AICD has lodged a submission on the review of the Local Government Act 1995 (WA) in Western Australia, focusing on the application of key governance principles and incorporating input from WA members. In the submission, the AICD provides insights to the current challenges faced by local authorities — obtained using the AICD’s Governance Analysis Tool.

We look forward to seeing the next phase of this work to improve local government governance arrangements.

Bearing down on BEAR

This month, the AICD and Herbert Smith Freehills (HSF) have collaborated to offer regulator, director and legal insights into the Banking Executive Accountability Regime (BEAR). Commencing on 1 July, BEAR will bring about a profound change in the regulation of remuneration and individual accountability for banks, building societies and credit unions (authorised deposit-taking institutions or ADIs) — and may have implications for the entire prudentially regulated sector.

Key features include the registration of directors and senior executives (“accountable persons”), accountability statements and maps, strengthened obligations for ADIs and their accountable persons, deferral of variable remuneration, greater intervention and enforcement powers for APRA. Sanctions for non-compliance include disqualification of accountable persons and penalties for ADIs.

On 10 May in Sydney, Ian Laughlin, chair of the AICD’s APRA-Regulated Entities Forum, will facilitate a discussion with APRA chair Wayne Byres, senior directors and an HSF partner. Panellists will provide practical perspectives on preparing for the BEAR. These insights will be of value to directors and senior management of all APRA-regulated entities.

Australia’s ‘C’ rating

Australia needs serious reforms to maintain its productivity and prosperity. Debating and achieving such reform requires investment from all stakeholders, including directors and the AICD.

As AICD Chairman Elizabeth Proust AO FAICD noted in the opening speech of the Australian Governance Summit in March, questions once the sole domain of public policy makers are no longer for them alone. Indeed, 65 per cent of Australian respondents in this year’s Edelman Trust Barometer survey said business leaders should take the lead on change rather than waiting for government, which indicates a widespread view that the business mandate has broadened.

Which is why last year the AICD issued a call to action to the nation’s policymakers and leaders in its Governance of the Nation: A Blueprint for Growth report. This report proposed reforms in key policy areas including national governance, fiscal sustainability, innovation, education, human capital, infrastructure and the not-for-profit sector.

This year, the AICD has released a scorecard, marking the progress — or lack thereof — towards achieving these important recommendations. You can read about the results in our story on page 28 or visit aicd.com.au/blueprint to check out the report.

The AICD has a diverse membership of more than 41,000, collectively responsible for millions of jobs and billions of dollars in investment.

Achieving good national governance is imperative to support directors in carrying out these responsibilities. This is why the AICD is committed to advocating for — and achieving — change that is in the national interest.