Governance relations

Advisory boards

Advisory boards (also known as advisory panels, advisory committees, advisory councils) are a group of suitably experienced people appointed to give considered advice, recommendations or counsel in connection with a business, corporate or other organisational purpose.

Advisory boards have no binding decision making authority or executive function in the context of the relevant business, corporation or organisation.

Download

Number of directors – board size

An organisation’s constitution generally prescribes the minimum and maximum number of directors that may be appointed to the organisation’s board, as well as the minimum number of directors to constitute a quorum at board meetings.

The maximum and minimum number of board members for statutory authorities and other public sector organisations are usually prescribed in the legislation by which the authority or organisation is constituted.

Download

Corporate governance in overseas jurisdictions

Although principles comparable to fiduciary duties for directors have reasonable global application in most jurisdictions, the laws and legal systems of foreign countries may differ markedly from those in Australia.

Directors of corporations operating in foreign countries should seek to ensure that they have a sound understanding of the legal systems in those countries and that the organisation has in place appropriate governance and management systems and processes to meet those legal requirements.

Download

Directors' right to seek external professional advice

Generally, boards make decisions on behalf of organisations by resolutions passed at duly convened meetings of the board or by circular unanimous resolutions in writing of all directors.

Also generally, individual non-executive directors do not have legislative or constitutional authority on their own initiative to commit the organisation to a contract, including one to provide professional advice to the director on matters relating to their board service.

Download

Governance issues in not-for-profit (NFP) organisations

NFP organisations have distinct and important differences to their for profit or commercial counterparts.

Their governance attributes need to be respectful of these differences if optimal performance within an effectively managed acceptable risk profile is to be achieved.

Download

Governance issues in private companies

Proprietary companies have distinct and important differences to both their public listed and not‑for‑profit counterparts.

Their governance attributes need to be respectful of these differences if optimal performance within an effectively managed acceptable risk profile is to be achieved.

Download

Managing relationships with auditors

The audit function for an organisation is vital to give assurance as to the truth, fairness and compliance with the law and accounting standards of an organisation’s financial statements and as to the adequacy of the organisation’s systems and controls in support of them.

For many organisations, especially larger public companies and charitable organisations, it is mandatory at law to appoint an independent and appropriately qualified accounting professional (external auditor) to undertake the external audit function.

Download

Performance review and appraisal of the CEO

Accountability for performance outcomes is a key tenet of good corporate governance, and as the most senior executive in the organisation it is important that the Chief Executive Officer (CEO) is held to account by the board.

Although the board should exercise this function on a continuous basis, it is good governance practice to set aside time, at least annually, to dedicate to a more formal performance review and appraisal of the CEO. Many organisations also incorporate the CEO’s annual remuneration review in that process.

Download

Position description for a chair

The chair is the person chosen to lead and manage the meetings and affairs of the board.

The role and basis of appointment of the chair is commonly set out in the organisation’s constitution or in its governance or board charter.

Download

Relationship between the board and management

A productive and harmonious relationship between the board and management is critical for good governance and organisational effectiveness. However sometimes this can be difficult to achieve in reality.

The board and management should be trying to achieve the same vision and objectives so a team approach based on trust and respect is more appropriate than a boss/ subordinate relationship.

Download

Role of chief executive officer or managing director

The most senior executive in an organisation is usually referred to as the chief executive officer (CEO). A CEO may or may not also be a director on the board of the organisation.

If that person also is a director of the board, then commonly that person may also be accorded status as the Managing Director (MD). As most CEO’s of listed public companies are also appointed as directors of the board of the company, these terms are often used interchangeably.

Download

Role of the board

Reference to board in this document means the group of individuals (howsoever described or called) in whom the governance, control, direction and management of the organisation is vested in accordance with its constituent documents or by legislation.

The board is responsible for the overall governance, management and strategic direction of the organisation and for delivering accountable corporate performance in accordance with the organisation’s goals and objectives.

Download

Role of the chair

The chair has been described as first among equals within the board of directors and is usually appointed to the position of chair by fellow board members, rather than directly by the organisation’s members or shareholders (subject to some exceptions for NFP and government/public sector organisations).

The chair acts as an important link between the board and the organisation’s management via the CEO. The role of the chair is not defined in the Corporations Act 2001, thus many functions of the chair are customary rather than formalised by law.

Download