1. Introduction <strong>Commonwealth</strong> authorities <strong>and</strong> companies (CAC bodies) play a major part <strong>in</strong> giv<strong>in</strong>g effect to government policy. They are a diverse range of organisations <strong>in</strong> terms of functions, <strong>in</strong>stitutional form, size, <strong>and</strong> not least, <strong>in</strong> respect of the particular governance processes by which such bodies are directed, controlled <strong>and</strong> held to account. The nature of the relationships between Parliament, M<strong>in</strong>isters <strong>and</strong> CAC bodies also makes proper governance an important matter for these organisations. The pr<strong>in</strong>ciples <strong>and</strong> practices discussed <strong>in</strong> this paper are based on knowledge that has been ga<strong>in</strong>ed from experts on corporate governance, results of a survey conducted of various CAC bodies <strong>and</strong> previous audit work <strong>and</strong> research undertaken by the ANAO. Some of the more recent related ANAO publications <strong>in</strong>clude a report on Government Bus<strong>in</strong>ess Enterprise Monitor<strong>in</strong>g Practices 1 <strong>and</strong> a review of accountability arrangements <strong>in</strong> statutory bodies 2 . Further relevant material is provided <strong>in</strong> the references section of this publication. What is <strong>Corporate</strong> <strong>Governance</strong>? <strong>Corporate</strong> <strong>Governance</strong> is not a new concept. However, it is an issue which is currently receiv<strong>in</strong>g a great deal of attention <strong>in</strong> Australia <strong>and</strong> overseas, both <strong>in</strong> the private <strong>and</strong> public sectors. The importance of good corporate governance has been highlighted <strong>in</strong> the private sector by the corporate excesses of the second half of the 1980s <strong>in</strong> Australia <strong>and</strong> overseas <strong>and</strong> the need to meet the challenges of global competition, technological progress <strong>and</strong> <strong>in</strong>creas<strong>in</strong>gly <strong>in</strong>tegrated f<strong>in</strong>ancial markets. In the public sector, recent reforms to improve efficiency <strong>and</strong> effectiveness, such as the commercialisation, corporatisation <strong>and</strong> privatisation of government organisations <strong>and</strong> the role of the Board <strong>in</strong> govern<strong>in</strong>g significant assets, <strong>in</strong> these transformed organisations, has focussed attention on the need for various new models of corporate governance. 3 Def<strong>in</strong>itions of corporate governance are many <strong>and</strong> varied. Broadly speak<strong>in</strong>g, corporate governance generally refers to the processes by which organisations are directed, controlled <strong>and</strong> held to account. It encompasses authority, accountability, stewardship, leadership, direction <strong>and</strong> control exercised <strong>in</strong> the organisation. For CAC bodies, key elements of corporate governance <strong>in</strong>clude the transparency of corporate structures <strong>and</strong> operations; the implementation of effective risk management <strong>and</strong> <strong>in</strong>ternal control systems; the accountability of the Board to stakeholders through, for example, clear <strong>and</strong> timely disclosure; <strong>and</strong> responsibility to society. 1 ANAO, Audit Report No. 2 1997-98, Government Bus<strong>in</strong>ess Enterprise Monitor<strong>in</strong>g Practices; Selected Agencies, September 1997. 2 ANAO, Audit Report No. 23 1998, Accountability <strong>and</strong> Oversight Arrangements for Statutory Bodies <strong>in</strong> the Former Industries <strong>and</strong> Energy Portfolio, December 1998. 3 Robertson, T., <strong>Corporate</strong> <strong>Governance</strong>, The Public <strong>and</strong> Private Sector, Unpublished Doctoral Thesis, Macquarie Graduate School of Management. CORPORATE GOVERNANCE IN COMMONWEALTH AUTHORITIES AND COMPANIES 1