Review of Commonwealth Government Business Enterprises ...

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10 2.3.8 The proportion of women on GBE boards is currently around 25% and compares favourably to both the 9.2% female representation on ASX top 200 companies (2010) 11 and international results. 12 The proposed amendments to the ASX Guidelines13 recommend the development of measurable objectives for achieving gender diversity, and the CAMAC report suggests that greater gender equity can be achieved by ensuring appointment processes are more transparent, and by formalising processes for keeping board composition under review in response to both performance and changing needs. In keeping with the introduction of measurable objectives for achieving gender diversity, the revised GBE Guidelines have incorporated the government’s policy in the updated document, requiring GBEs to develop Board plans that incorporate strategies for achieving the government’s policy with respect to a target of 40% representation by women on government boards by 2015. 2.3.9 Where departmental offcers are appointed to GBE boards, they are expected to act in the best interest of the GBE and not be there to represent the interests of the government, which may be at variance with those of the GBE. It is envisaged that such appointments would only occur in exceptional circumstances, such as for GBEs that are to be wound down, and where it is not practical to appoint a director through the normal processes. 2.3.10 It should be noted that the fnal decision on appointment of directors remains with the Shareholder Minister(s) and the Prime Minister, or at his/her discretion, the Cabinet, and it is expected that any appointments made will be in line with agreed selection criteria. Proposed change: 3.4c 2.7c The appointment of departmental offcers to GBE boards will may only be considered in exceptional circumstances, having regard to their ability to represent the interests of the Government, their possession of the business skills referred to above, and to any potential conficts of interest that might arise. , and the particular circumstances of the GBE (such as GBEs in winding-down mode). In such cases, the appointed departmental offcers are expected to act in the best interests of the GBE when there is a divergence between the interests of the GBE and those of the Government. Board Appointment and Performance 3.5 2.8 The Board Chairperson Chair shall head a board Board Nomination and Remuneration committee, which shall, provide the Shareholder Minister(s), through the board, with a list of suitable candidates for Board membership with recommendations on board composition and membership. a. The Chair shall, following consultation with the Shareholder Minister(s), develop a board plan which includes: • The medium term aims in relation to board composition, taking into account the strategic objectives of the GBE; • A forecast of likely board vacancies; and • An assessment of the skill requirements for the board in the context of the strategic requirements of the GBE. Exposure Draft 11 Australian Government, Equal Opportunity for Women in the Workplace Agency, 2010 Census Key Findings Report; http://www.eowa.gov.au/Information_Centres/Resource_Centre/Statistics/GenderWorkplaceStats_3_11-Onlineversion.pdf 12 CAMAC report, page 55, http://www.camac.gov.au/camac/camac.nsf/byHeadline/PDFFinal+Reports+2009/$fle/Board_Diversity_B5.pdf 13 Proposed amendments to the ASC Corporate Governance Council Corporate Governance Principles and Recommendations’ 22 April 2010 (Exposure draft) http://www.asx.com.au/governance/corporate-governance.htm
. The Chair shall write to the Shareholder Minister(s) at least three months prior to a vacancy arising on the board or in the role of CEO • Through the Chair, the board should advise the Shareholder Minister(s) about its preferred candidate for the position of CEO. The CEO is directly accountable to the board. • Following consultation with the Shareholder Minister(s), the board may provide, through the Chair, a shortlist of candidates for board vacancies. • Additional processes for identifying candidates such as public advertising or the use of executive search processes may be undertaken by agreement with the Shareholder Minister(s). • Chairs may recommend the reappointment of an existing director where this is sought by the director and where appropriate (i.e. based on evidence of good performance, where the tenure falls within the requirements set out in legislation applying to the GBE and where the term has not been excessive). • All recommendations for appointment should have regard to government policy on fostering a governance culture that embraces diversity in the composition of boards with the objective of achieving the Government’s target of 40% of Government board members to be women, 40% of board members to be men, and the remaining 20% of positions to be held by either women or men, with this target to be achieved by 2015. 3.5(a) 2.9 The Shareholder Minister(s) may elect to appoint a candidate not proposed by the Committee Chair. 3.5(b) Shareholder Ministers shall consult with the Prime Minister and theTreasurer on all Board appointments. 2.4 CEO Succession Planning 2.4.1 The selection of a CEO is an important governance function for the board. As part of this responsibility, the board should also have in place a plan for the eventual or sudden replacement (e.g. through an unanticipated departure, health reasons etc) of the existing CEO to ensure business continuity and stability. 2.4.2 Ideally, succession planning should start well in advance of the time at which a CEO is to be replaced. This is the strongest case for succession planning – to increase the time to react and to broaden the portfolio of alternatives. 2.4.3 A study published in the Harvard Business Review found that almost 40% of new CEOs fail in their frst 18 months and this is attributed to selecting the wrong individual by having no or poor succession planning in place. 14 2.4.4 Succession planning is therefore an important component of the overall risk management strategy of a business and should therefore form part of the board’s regular activities. Accordingly, Finance proposes that the GBE Guidelines be amended requiring that boards have a succession plan in place for the CEO and to provide an annual assurance to Shareholder Minister(s). • While the CEO is normally appointed by the board of the GBE, appointments are required to be referred to the Prime Minister or Cabinet for agreement. Exposure Draft 14 Charan, R. ‘Ending the CEO Succession Crisis’, Harvard Business Review, 1 Feb 2005 http://hbr.org/products/8851/8851p4.pdf 11
Page 1 and 2: Australian Government Department of
Page 3 and 4: Contents Introduction 2 Part 1 - Ov
Page 5 and 6: The key topics identifed for discus
Page 7 and 8: Part 1 - Overview 1.1 Mandate and O
Page 9 and 10: Proposed Change: (New) 3.3 2.3 a. A
Page 11: 2.3.4 These changes aim to make GBE
Page 15 and 16: 2.5.4 A similar principle operates
Page 17 and 18: 2.6.4 These issues have also previo
Page 19 and 20: Part 3 - Planning and Reporting (Pr
Page 21 and 22: Table 2: Best Practice Timetable fo
Page 23 and 24: Proposed Change: (Replaces entire 2
Page 25 and 26: 3.3 Statement of Corporate Intent (
Page 27 and 28: 3.4.7 The focus on comparing budget
Page 29 and 30: 2.11b(i) 3.14 The current disclosur
Page 31 and 32: Proposed change: (New) 3.21 Proposa
Page 33 and 34: Part 4 - Financial Governance 4.1 C
Page 35 and 36: 4.2A Weighted Average Cost of Capit
Page 37 and 38: 4.3 Managing Risks 4.3.1 The govern
Page 39 and 40: Part 5 - Other Governance Matters 5
Page 41 and 42: Appendix A: Commonwealth Government
Page 43 and 44: Part 1 - Overview Defnition 1.1 A G
Page 45 and 46: 1.9 In addition to setting a princi
Page 47 and 48: 2.6 The code of conduct may cover t
Page 49 and 50: 2.17 On an annual basis the GBE boa
Page 51 and 52: Table 2: Best Practice Timetable fo
Page 53 and 54: Measure Key Performance indicator F
Page 55 and 56: d. commentary on any emerging issue
Page 57 and 58: 3.23 GBEs should allow a reasonable
Page 59 and 60: Financial Targets for GBEs 4.7 All
Page 61 and 62: Part 5 - Other Governance Matters W
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5.10 The above requirements relatin
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Governance Arrangements for Commonw
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Principles Part 1 - Overview 1.1 Th
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(c) earn at least a commercial rate
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(e) The plan also covers any other
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Keeping Shareholder Ministers Infor
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Part 4 - Financial Governance Capit
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shareholder would expect the adopti
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Partly Owned GBEs, Partly Owned Sub
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Attachment A Matters for Inclusion
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