PUBLIC SECTOR BOARDS NEED TO BE VIGILANT ABOUT SELECTION OF DIRECTORS
Speaking on the subject of ‘Great governance during times of change’ at the recent Public Sector Governance Forum held in Canberra, Julie Garland McLellan noted the importance of recruiting the best possible talent to government boards or statutory authorities. Her comments recognise the growing influence of the Uhrig Report on public sector corporate governance.
“Who you let through the door is increasingly important in the effectiveness of statutory authorities. Great people can do great things, but they have to be appointed first, and that’s a challenge,” says Garland McLellan.
For those statutory authorities requiring greater independence, and therefore having greater power in decision-making, authority holders must be the very best governance talent available.
“Decision-making power on these Boards has increased with the importance of their independence from the government of the day. The Future Fund Board of Guardians is a good example of this relationship working well,” she says.
The government is implementing the recommendations of the Uhrig review in a considered and measured way. Where the review indicated that organisations were best governed under administrative control, the “executive management” template, the public sector has been able move decisively to remove the quasi independent board structures and replace these with advisory boards and accountable line management. Where the review indicates the applicability of an independent ‘board template’ governance structure, the public sector has found it more difficult to move forward because of the difficulty in recruiting qualified, skilled and experienced directors, whose judgement is known and respected by the Minister but who are demonstrably independent of the Minister.
“It is not just a case of Ministers appointing their mates” says Garland McLellan. “Ministers must believe the board will make appropriate judgements. Until the recent emergence of governance qualifications Ministers have only been able to form that belief through personal knowledge of the people concerned. We now see some robust recruitment mechanisms, often with a clear specification, input from professional recruiters, Treasury and the portfolio department, and even open advertising. But, at the end of the day, the Minister must still believe that the person appointed will consistently make good decisions, under pressure and without requiring excessive direction which can place the Minister in the invidious role of a shadow director.”
“Anyone appointed to a company board owes their duty to the company and not to the person that appointed them. This is a key tenet of the Corporations Act and directors who act for an improper purpose or when affected by conflicts of interest are breaking the law.” cautions Garland McLellan “This is a serious danger for public sector employees or ministerial staffers who are also board members. It is important that these board members are appropriately supported so that they can manage the conflicts that will inevitably arise without embarrassing their Minister or leaving themselves open to serious legal repercussions.”
For more information on ‘Great governance during times of change’ visit www.mclellan.com.au
To arrange a time to discuss this issue further with Julie, contact Steve Casey on
0419 206 373.