Review of Commonwealth Government Business Enterprises ...

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2.4.5 The independence of the board from executive management is an important element
of an appropriate governance framework. The appointment of CEOs to the boards of
GBEs, via the creation of a Managing Director (MD) position, departs from better practice
governance approaches. The New Zealand approach is to have no MDs overseeing the
daily operations of the state owned enterprises, which ensures a distinct separation
between shareholders, board and management. Finance notes that any decision to
appoint a CEO to the board remains at the discretion of the Shareholder Minister(s).
While the CEO (and often the senior management team) attends all board meetings, the
fnal decision about any matter on the agenda rests with the board. In addition to this,
and depending on the Chair, the board may schedule some ‘board-only’ time to deal with
confdential matters; without the CEO present.
Proposed change: (New)
2.10 Any decision to appoint the CEO as a director, is at the discretion of the Shareholder
Minister(s) and the CEO recruitment and succession arrangements undertaken by the
board should refect this.
2.11 Boards are to implement and maintain a succession plan for CEO positions and to
provide an annual assurance to Shareholder Minister(s) that this is the case.
2.5 Board Tenure
2.5.1 The renewal of directors is a key aspect to the performance of a GBE. Accordingly,
when considering non-executive director appointments, the Commonwealth needs to
be conscious of balancing the competing objectives of maintaining continuity, skills and
experience on GBE boards, with board planning and the introduction of fresh thinking. 15
2.5.2 In seeking to achieve this balance, most GBE boards are suffciently large to retain a core
level of corporate knowledge and at the same time cope with the introduction of new
directors contributing different perspectives and skills to issues facing the GBE. While
terms are generally for three years, 16 and reappointment may be considered at the end of
that period, Finance considers that setting an indicative maximum board service period
of two three-year periods for directors (i.e. a maximum of six years), and three three-year
periods for Chairs (i.e. a maximum of nine years, inclusive of any time where the Chair
served as a director) may assist in ensuring that GBE boards are periodically refreshed. 17
2.5.3 This principle is favoured in Canada, where the Board Resourcing and Development Offce
(BRDO) suggests that appointments to boards of government-owned businesses should
be staggered and, under normal circumstances, directors should be appointed for a
maximum of six years. 18
Exposure Draft
15 The Uhrig Review (p110-101) considers the issue of board tenure and notes that in all appointments there is a balance to be made between the benefts
of continuity, and the opportunity to enhance performance from board renewal.
16 GBE Governance Arrangements, paragraph 3.7(http://www.fnance.gov.au/publications/governance-arrangements/index.html)
17 These terms are consistent with the fndings of the Uhrig Review (p101). Further, it is consistent with the advice of the ASX Principles (p18) that board
renewal is critical to performance and that entities be conscious of the duration of each director’s tenure.
18 Board Resourcing and Development Offce (BRDO) 2005, Appointment Guidelines – Governing Boards and Other Public Sector Organizations, British
Columbia, Canada, 14 July 2005. p20. (http://www.fn.gov.bc.ca/brdo/appoint/AppointmentGuidelines_PublicAgencies.pdf). It was also favoured by the
Uhrig Review (p101).