Corporate Governance in Commonwealth Authorities and Companies

The impact of public sector reforms has seen the public sector increasingly adopt private
sector corporate governance practices including increased visibility in decision making,
standardised reporting and use of Board sub-committees to, for example, oversight the
audit function, review renumeration and review the functions of the Board itself.
At the same time, through corporate awareness that environmental and societal interests
can have an impact on the reputation and long-term success of an organisation, the private
sector is beginning to embrace concepts of greater social and community responsibility
(for example, the need for Environmental Impact Statements) thereby broadening
corporate responsibilities beyond the traditional internal focus on shareholders,
accounting checks and balances and financial outcomes.
Despite the growing convergence between the private and public sectors there are still
some important differences between the two sectors, such as the ministerial and other
public accountability aspects of governance within the public sector. Therefore, the simple
transfer of private sector practices concerned with corporate governance may not provide
optimal solutions for the latter. Instead, what is required is the sensible application by
CAC bodies of the principles underlying private sector practices, which properly take into
account the environment and context in which those practices are to be applied.
The diversity of CAC bodies, and the reforms to the public sector, are likely to require
different models of corporate governance although the core components that underpin
good corporate governance will be similar. Primarily, the directors or their equivalent will
need to establish:
◗ responsibilities – who should do what;
◗ accountabilities – to whom those with responsibilities should account and how; and
◗ appropriate checks and balances – the system of supervision, control procedures and
communication flows.
Against a background of systematic change, the traditional accountability and
responsibility of public sector Boards has been, and will continue to be, made reasonably
explicit in legislation such as the Financial Management and Accountability Act 1997
(FMA Act), the Commonwealth Authorities and Companies Act 1997 (CAC Act) the
Auditor-General Act 1997 and Public Service Act (PSA). However, such legislation has
been designed to be more principles-based and aligned with better practice in both the
public and private sectors.
To manage and respond to such continual and systematic change, CAC bodies will need to
develop a culture of continuous improvement, timely and effective evaluation and
performance assessment using models of best practice in both the private and public
sectors, and inculcate such an approach across the whole of the organisation.
In an environment which will become increasingly competitive and contestable with
additional demands being placed on scarce resources, Boards will need to examine
continually ways to innovate, adapt and strengthen those structures and processes within
their organisations which support their leadership and decision-making and ensure sound
and effective governance.
CORPORATE GOVERNANCE IN COMMONWEALTH AUTHORITIES AND COMPANIES
5
Introduction