Contents | 1. Introduction | 2. Life cycles | 3. Models | 4. The Board
5. Board review questionnaires | 6. Resources

Governance and governing

The Macquarie dictionary defines governance as:

• government; exercise of authority; control.
• method or system of government or management.

It includes in the definition of to govern:

• to rule by right of authority, as a sovereign does: to govern a state.
• to exercise a directing or restraining influence over; guide: the motives governing a decision.
• to exercise the function of government.
• to have predominating influence.

There are many and varied definitions of corporate governance.

Corporate governance is the system by which entities are directed and controlled. (Australian standard AS 8000 - 2003 Good Governance Principles)

Corporate governance generally refers to the processes by which organisations are directed, controlled and held to account. It encompasses authority, accountability, stewardship, leadership, direction and control exercised in the organisation. (The Australian national Audit Office, 1999)

Governing, applied to a board of directors refers to its legal right to exercise authority over some organisation. Governance is how the board goes about exercising its authority over an organisation; it is a system or process for managing a board’s affairs. (Diane J Duca, Non Profit Boards Roles, Responsibilities and Performance)

Key question: What is governance?

Changing context

In recent years there has been an increasing focus on governance in both private companies and non-profit companies. There have been many changes to Australian and State law that impact on the duties and responsibilities of Directors. Pessures and changes include govvernments holding boards more accountable for the use of public funds and legislative changes making boards of directors more accountable for what happens in their organisations, eg, the NSW Occupational Health and Safety legislation.

Key question: What are the pressures and changes affecting your board?

Life cycles

Organisations progress through life cycles so the role of the board can vary depending on the where the organisation is in its life cycle. The role of the board in starting up an organisation with no staff can be quite different to the role of the board in an organisation which has grown to have hundreds of staff (even though the legal responsibilities and duties may be similar for both).

Key question: Where is your organisation in its life cycle? What are the governance challenges for your board?

Models

There are many models of governance. There is no one-size-fits-all. For example:

• Tripartite
• Stewardship
• Managerial
• Political
• Carver

Key question: What governance model are you using? Does everyone on the board share the same understanding?

Roles, duties and responsibilities

Every board of directors needs to be clear about its roles, its duties and responsibilities. The board needs to be able to answer questions like:

• What are the roles and powers of board members?
• What are our responsibilities?
• How are we appointed?
• What skills do we need?
• What committees will we have and what are their roles and responsibilities?
• How will we report to our members?
• What are the responsibilities of our members?
• What is the role of the CEO?
• What is the nature of the relationship between the board and the CEO?

Key question: What are all the questions your board needs to be able to answer? Does your board have explicit answers?