Review of Commonwealth Government Business Enterprises ...

2.5.4 A similar principle operates in New Zealand where terms of up to three years are favoured.
A director may be reappointed for a second term of three years depending on the
director’s performance and their skills continuing to be relevant to the business.
However, a director may only be appointed for a third term of three years under
‘exceptional circumstances’. 19
2.5.5 There may be limited circumstances where this may not be appropriate. For example:
• The BRDO suggests that where a GBE requires a director with a highly specialised
skill set, it may be appropriate that the director serve for more than six years. In
general, Finance does not consider that this is relevant to the Australian context as
current GBEs operate in market sectors that are not so highly specialised that there
is great diffculty in attracting suitably qualifed candidates. Further, GBEs should
maintain a balance of skills on the board and retain the capacity to obtain specialist
advice on specifc issues to augment the board’s skills.
• Alternatively, there may be circumstances in which a GBE could beneft from
continuity through a period of major change or while the GBE is managing a
signifcant risk (such as a signifcant divestment or acquisition). In these cases, a
shorter reappointment period of one or two years might be appropriate. 20 Finance
considers that such exemptions might be relevant in the case of GBEs that are being
restructured, sold or wound-up or, where other exceptional circumstances exist,
which may necessitate such a reappointment.
2.5.6 Another relevant situation is the case of an existing director being appointed Chair of the
same GBE. In this case, extending the service period by up to three terms (making a total
of nine years) may be warranted to allow for an adequate period to make a contribution at
this level and to assist in providing continuity of direction for the GBE.
• The appointment of a Chair is a special case given the infuence that the position
holds over the GBE’s governance and strategic direction and an extended term
may therefore be appropriate. However, there is also a need for planning when
appointing new directors such that the transition to a new leadership team is as
seamless as possible.
2.5.7 Accordingly, Finance proposes that the GBE Guidelines be amended to introduce an
indicative total service period for non-executive directors of two terms (or a total of
six years), and in the case of the Chair three terms (or a total of nine years). Further
reappointments should be considered on a case-by-case basis, taking into account any
exceptional circumstances. Formalising this requirement should assist with periodically
updating board composition and addressing any potential perceptions that a decision to
not reappoint after two terms may be attributed to poor performance.
2.5.8 Finance also considers it appropriate to provide additional guidance on the criteria under
which the Chairs and the Shareholder Minister(s) may review a director’s position on a
board, to provide greater clarity in relation to expectations for performance and tenure, and
to minimise misunderstandings.
Exposure Draft
19 Crown Company Monitoring Agency Unit (CMCAU) 2007, Owner’s Expectation Manual, New Zealand, March 2002. p 43.
http://www.comu.govt.nz/resources/pdfs/oem-soe-07.pdf (This is also supported by the Uhrig Review (page 101).
20 Uhrig Review, page 101.
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