Review of Commonwealth Government Business Enterprises ...

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14 Proposed Change: 3.7 2.13 Board appointments should normally be for terms of three years. The Board Nomination and Remuneration Committee is free to include retiring Directors in its list of candidates. a. The term for non-executive directors should not normally exceed two terms (i.e. six years) and for the Chair three terms (i.e. nine years). Appointment terms may be staggered or varied in duration to maintain board continuity. b. Appointments exceeding two terms will be considered on a case-by-case basis taking into account exceptional circumstances. 3.6 2.14 The Remuneration Tribunal determines remuneration for directors that is compatible with their roles and responsibilities, and having regard to, amongst other things, rates paid by the private sector, and federal public offces. 3.8 2.15 The Shareholder Ministers may, at their discretion, remove directors at any time prior to the completion of their term of appointment. a. In the event that a GBE is not performing satisfactorily, the Shareholder Ministers will initiate prompt remedial action. Dismissal of the directors would be considered, particularly in any case of failure to keep Ministers adequately informed, and in situations of ongoing under-performance in respect of fnancial or other aspects of the operations of the business. b. A director may be placed in a situation where continuing to be a GBE director could embarrass the GBE or the Shareholder Minister(s). In such situations, the director should raise the issue with their Chair immediately. The Chair in turn will decide whether it is necessary to raise the issue with the Shareholder Minister(s). In a worst case situation, the director may be asked to resign, or failing that, be removed. 2.6 Board Induction, Training and Performance Evaluation 2.6.1 As is the case in the private sector, board knowledge, skills and performance can be strengthened through effective induction programs for new directors and ongoing training, and regular performance reviews of all directors. 21 Better practice would also indicate that senior managers could beneft from induction and training programs. 22 2.6.2 Training enables directors to build on their existing skills, and become more effective participants in board discussions and in the execution of their directors’ duties. In addition, regular board reviews provide an assessment of how a board is performing. Performance reviews therefore serve as a guide to the effectiveness of directors and can improve performance through feedback. 2.6.3 The ASX Corporate Governance Council’s revised ‘Corporate Governance Principles and Recommendations – 2 nd Edition’ (the ASX Principles) recommends that the performance of the board be reviewed regularly and that induction procedures include elements designed to allow new board appointees to participate fully and actively in board decision-making. 23 Exposure Draft 21 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations – 2nd Edition (ASX Principles), pp15 and 19 (August 2007). http://www.asx.com.au/governance/corporate-governance.htm 22 ASX Principles, page 15. 23 ASX Principles, page 19.
2.6.4 These issues have also previously been considered by the Joint Committee of Public Accounts and Audit (JCPAA) in Report No. 372 Corporate Governance and Accountability Arrangements for Commonwealth Government Business Enterprises. (December 1999), which recommended that the GBE Guidelines be amended to include a requirement that GBE boards ensure that there are appropriate and effective induction, education and training programs offered to new and existing directors. 24 More recently, the CAMAC report expresses a similar position. 25 Finance considers that the GBE Guidelines should also be amended to refect this position. 2.6.5 Finance continues to support the spirit of the recommendation and considers that the GBE Guidelines should not be too prescriptive in mandating specifc program elements. In this regard, GBE boards will have varying levels of experience and therefore should retain some fexibility in determining the precise nature of their development needs. 2.6.6 However, as a general principle, Finance considers that directors should be encouraged to attend training to build on their previous experience and skills and develop the additional skills needed to enhance their contribution. Finance considers it appropriate to include a general requirement in the GBE Guidelines for GBE boards to ensure that director orientation and development mechanisms are in place and that senior managers also have these opportunities. 2.6.7 A similar argument can be made in relation to board performance reviews. In that case, the JCPAA also recommended that the GBE Guidelines be amended to include a section requiring confdential board and director performance appraisal. 26 The responsibility for assessing board performance rests with the GBE Chairs. Chairs are to conduct an annual assessment of the performance of each director individually; the board as a whole will assess the performance of itself; and the board will then assess the performance of the Chair. 2.6.8 To enhance transparency and accountability, Finance recommends that GBE Chairs then provide written confrmation to the Shareholder Minister(s) that this process has been followed. There is no requirement for the Shareholder Minister(s) to be provided with details of individual assessments. 2.6.9 Good governance requires that the respective powers and responsibilities of boards and management are clearly defned. Finance recommends that boards establish and maintain clear terms of reference for their sub-committees to defne their functions and powers and to ensure that directors and management each have a clear understanding of their respective responsibilities and roles. 2.6.10 The current GBE Guidelines are silent about expectations around board attendance. The absence of a director can have an adverse impact on the board’s deliberations and may bring into question their motivation and commitment to being on the board. Finance considers that guidance around explicit expectations for board attendance, and the sanctions for non-attendance, be included in the GBE Guidelines. Exposure Draft 24 JCPAA Report No. 372 Corporate Governance and Accountability Arrangements for Commonwealth Government Business Enterprises (JCPAA Report 372), page 68 (December 1999) at http://www.aph.gov.au/house/committee/jcpaa/GBE/contents.pdf 25 Australian Government Corporations and Markets Advisory Committee, Guidance for Directors April 2010. http://www.camac.gov.au/camac/camac.nsf/byHeadline/PDFFinal+Reports+2010/$fle/Guidance_for_directors_Report_April2010.pdf 26 JCPAA Report 372, page 68, at http://www.aph.gov.au/house/committee/jcpaa/GBE/contents.pdf 15
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 and 12: 2.3.4 These changes aim to make GBE
Page 13 and 14: . The Chair shall write to the Shar
Page 15: 2.5.4 A similar principle operates
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
Page 63: 5.10 The above requirements relatin
Page 66 and 67:
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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