Review of Commonwealth Government Business Enterprises ...

6
Part 2 - Board and Corporate Governance
(previously Part 3)
2.1 Public Sector Accountability
2.1.1 The legal roles and expectations of directors are outlined in both the Corporations Act
and the CAC Act. The CAC Act (section 15, Report of Operations) now outlines the
requirements for boards to report on arrangements in place for contributing to the
appropriate governance and performance of each GBE. Finance considers that it would be
appropriate for GBE boards to expand their reporting to include this information.
Proposed Change:
3.2 2.2 Boards have absolute responsibility for the performance of the GBE, and are fully
accountable for this to the Shareholder Minister(s). Boards should implement
effective governance frameworks to support their role and responsibilities, and report
on implementation in the Annual Report.
2.1.2 Finance is proposing that new appointees to GBE boards receive a letter from the
Shareholder Minister(s) (or in the case of Chief Executive Offcers (CEO), the employing
board) advising of their appointment and outlining other matters of relevance to the
position. These letters are signifcant because they provide an initial frame of reference
to new appointees in regard to their obligations and accountabilities and outline the
Shareholder Minister(s)’ expectations of the GBE.
2.1.3 Letters of appointment should also outline the appointee’s public sector accountability
obligations. All appointees should be aware that the activities of a GBE are (potentially)
subject to Parliamentary scrutiny (e.g. through Parliamentary Committee inquiries,
estimates hearings etc) and audit processes (e.g. through an independent performance
audit conducted by the ANAO). This is in line with the requirements under the Governance
Arrangements for Portfolio Bodies 2 that letters of appointment cover such matters.
2.1.4 Further, the ASX has recently highlighted the importance of developing comprehensive
appointment letters that assist appointees to develop a strong understanding of their
role. The ASX has developed an indicative list of matters that should be considered when
drafting appointment letters. 3 There may be merit in adapting the list to the GBE context
and adding it to the revised GBE Guidelines as a guide to developing better practice
appointment letters.
2.1.5 The list could be used by departments assisting the Shareholder Minister(s) to develop
appointment letters and by GBEs preparing CEO appointment letters.
2.1.6 Finance also recommends the inclusion of a requirement for formal responses to letters
of appointment to be included as part of the appointment process. Such an acceptance
letter would include an undertaking by the appointee to advise the Shareholder Minister(s)
if there is any change in their circumstances that might impact their ability to be a director.
Exposure Draft
2 http://www.fnance.gov.au/fnancial-framework/governance/docs/Governance-Arrangements-for-Australian-Government-Bodies.pdf
3 ASX Principles, page 14
(http://asx.ice4.interactiveinvestor.com.au/ASX0701/Corporate%20Governance%20Principles/EN/body.aspx?z=1&p=13&v=1&uid= )