Welcome to Directors Australia’s blog
Disclaimer: This blog site has been prepared by Directors Australia for the purposes of providing general information only. Nothing on this blog site should be used or relied on for legal or other advice by any party. Each party's individual circumstances may change the effect and relevance of any matters discussed.
Thursday, 11 October 2012 00:00
By John WilliamsonBoards meet intermittently. In most cases they require professional corporate governance support to ‘make things happen’ in between, as well as for, board meetings. The Company Secretary will generally be the chief administrative officer of the board, and will often in medium to large organisations be supported by a professional secretariat.
Management also require professional corporate governance skills to ensure appropriate governance frameworks, policies and processes exist and that any external or internal compliance requirements are met. The Company Secretary will in also in most cases be the chief governance officer and ‘keeper of the corporate conscience’.
For Corporations Act companies, the Company Secretary appointment is a statutory one and attracts statutory duties.
The Company Secretary and the CEO are often the only ‘direct’ employees of a board. While the Company Secretary will be responsible to the board on board-related issues, from an organisational perspective he or she will most likely also directly report to the CEO or another senior executive – particularly if other organisational duties form part of a role description. The Company Secretary role can be difficult at times with various inherent tensions – especially where multiple role responsibilities are involved. (The High Court decision in James Hardie also made it clear that where a Company Secretary’s role is combined with another role - in that case, General Counsel - the degree to which a person participates in decision-making will determine their duties as opposed to their title.)
So in this complex context, what makes a good Company Secretary? Based on my long experience both as a Company Secretary and in mentoring current and ‘budding’ Company Secretaries, the following key attributes are the ‘essential basics’:
- Governance expertise: Company Secretaries should be the corporate governance professional in their organisation – they should be the ‘go to’ person for governance issues. To be this they should have undertaken at least some initial formal training in governance and company secretarial practice. They then need to ensure a current knowledge of both current developments affecting governance and also best practice in corporate governance – continuing professional development is key.
- Organisational knowledge. The Company Secretary must understand the business and the context of their organisation. They must be able to translate governance theory into appropriate frameworks, policies and processes for their organisation. They must be able to develop and implement these in a way that their organisation can readily understand and comply with.
- Planning skills. A good company secretary is usually a very organised person. This is essential given that board and committee meeting cycles are schedule-driven and that external and internal compliance obligations must be met on time.
- An eye for detail. A ‘command of the detail’ is required. A Company Secretary must ensure that the work of the board in particular as well as the larger organisation is well planned and executed and that compliance with relevant requirements, policies and procedures is facilitated. On the other hand he/she must also understand the strategic goals and plans of the organisation.
- Effective communication. Company Secretaries work with senior people – board members or directors, CEOs, senior executives and often many senior external stakeholders (including regulators, investors and funders). They must possess discretion, diplomacy, tact, emotional intelligence and good negotiation skills. They must able to listen to well and effectively communicate both orally and in written form.
- Integrity and independence. As the ‘keeper of the organisation’s conscience, a Company Secretary must possess outstanding integrity, and be able to provide impartial, frank and fearless guidance and advice. He/she must possess the courage to raise issues and concerns and be accountable and transparent for his/her actions and decisions.
- Solid judgment. The ability to assess and make sound judgements, often in circumstances involving conflicting issues and ends, is a key requirement for a Company Secretary. This is especially so given the senior people a Company Secretary has to deal with.
- Commitment. A commitment to doing ‘a good job’ is essential. This could be said to apply to many organisational roles. However it particularly applies to a Company Secretary given the continuing ‘spotlight’ he/she is under form both internal and external stakeholders.
The above is not an unrealistic set of requirements. Many good Company Secretaries I have encountered possess all of the above (and more!) The mix of a seemingly never-ending round of board meetings, senior stakeholder requirements and interactions, and time-driven compliance requirements can be challenging! The attributes outlined above are all needed to discharge a Company Secretary role well.
Monday, 01 October 2012 00:00
By Kerryn Newton
Over the last decade there has been ever increasing expectations of boards and directors in terms of governance. ‘Best practice’ governance standards are set out in various standards such as the ASX’s Corporate Governance Principles and Recommendations, and APRA Prudential Guidelines.
The ASX, among other things, is looking for best practice in managing risk, clarity in respective roles and responsibilities of board and management, and a diversity of backgrounds and skills within boards. It has outlined its guidelines around eight key principles and has taken a “if not, why not” approach to their adoption.
Many such standards recommend that boards conduct regular evaluations of their performance and that of their directors. For example, recommendation 2.5 of the ASX’s Corporate Governance Principles and Recommendations expects that companies will disclose the process for evaluating the performance of the board, its committees and directors.
In our experience, organisations across all sectors - including the not for profit sector - look to such standards as an appropriate governance benchmark.
For some organisations, a board performance evaluation might seem a confronting task. Others see the requirement as a ‘box ticking’ exercise to satisfy the relevant governance requirement. However, in my experience a board evaluation can be an invaluable tool for improving and enhancing board performance.
The evaluation process enables a board to stop and reflect on its performance – which is otherwise difficult to do in a busy board calendar. Having an objective and expert facilitator enables a board to deal with issues in a frank way and draw on the facilitator’s insight from working with a multitude of other boards.
A board that is evaluating its own performance also sends a clear message within the organisation and to external stakeholders about the board’s accountability for its performance.
At Directors Australia we conduct confidential and objective evaluations and work with boards to implement simple but effective practices to improve performance. The consultants who conduct our board evaluations are directors themselves and bring first-hand board experience in addition to their board consulting experience to the evaluation process.
Examples of outcomes that we have seen from board evaluations include:
- enhanced systems for risk reporting to a board
- better defined management reporting expectations that, in turn, formed the basis of improved relationships between directors and the organisation’s executive management team
- enhanced boardroom dynamics by identifying an issue of contention between directors and facilitating a discussion to resolve that issue
- a re-structured board committee system to better align with the company’s strategic direction
- a redesigned financial report to a board focussed around key metrics agreed to by the board
- an identified need for board renewal and development of mechanisms to achieve that renewal.
Read more: the ASX Corporate Governance Council Principles and Recommendations
Tuesday, 10 July 2012 00:00
By Tim Murray
Managing Director of Culture Strategy Partners
Who is responsible for ensuring the organisation has a culture that supports its strategic objectives and allows it to achieve its vision?
While the leadership team is responsibility for developing, activating and managing the organisation’s culture, the board has a crucial governance role to play in a successful cultural outcome.
Performance and Sustainability
Boards exist to exercise independent oversight over companies and their management, and safeguard the interests of shareholders.
Performance and sustainability is arguably then the board’s ultimate responsibility.
In today’s increasingly competitive, complex and rapidly changing business world, there is a widening performance gap between those with strong cultures and those that are frustrating and depressing places to work. Those businesses with strong cultures will logically win the battle to attract and retain the best people – so the strong will get stronger, and the weak will get weaker.
Corporate scandals and failures
There are reasons other than just performance that boards need to focus on culture. The presence of just one of the four cultural traits below would likely have prevented the vast majority of corporate scandals and failures reported in the media in recent years. These traits give boards confidence that the organisation is wired for good risk management, and focussed on driving performance and sustainability.
- A Culture of Transparency: Transparency as a cultural trait gives the board the confidence that they are getting the complete picture from management – often referred to as a “no surprises” culture.
- A Culture of Accessibility: Closely aligned with transparency, a culture of accessibility, often called an “open door culture”, is about being organisationally open and accessible, from front line workers right through to the board. This builds mutual trust and understanding, and creates an environment in which people feel free to express their ideas, opinions, problems and concerns.
- A Culture of ‘Collective Identity’: As humans, our personal identities are shaped by the relationships in our lives. The overarching objective of your culture program is to foster the right relationships - through shared goals, shared knowledge and mutual respect – that will shape the right “collective identity” for you organisation. This leads to individuals identifying strongly with the organisation, and a collective, coordinated motivation towards what’s best for the organisation as a whole.
- A Culture of Accountability: An accountable culture is crucial to sustainable performance. Senior management have to be good at holding employees to account, and the board has to be good at holding senior management to account.
Wednesday, 20 June 2012 00:00
By Gerry Lambert
Directors have a number of key financial responsibilities under the Corporations Act 2001, not the least of which is to declare that their company’s annual financial statements comply with accounting standards and represent a true and fair view of the affairs of the company. Directors also have duties of care and diligence, and to prevent insolvent trading.
Recent case such as Centro have highlighted that all directors must have a certain degree of financial literacy.
Below is a non-exhaustive checklist of questions which directors might ask themselves regarding financial governance in their company.
- Do I understand the company’s financial statements and the relationship between each of them?
- Do I independently read and critically assess financial documents and statements presented to the board by management and third party advisors?
- Am I across the key financial metrics relevant to the company?
- Am I satisfied that the regular financial report to the board effectively reports on those key financial metrics?
- Does the financial report provide me with enough information, including trend and benchmark information, to form a view on the company’s financial position?
- Do I have a high level of trust in the Chief Financial Officer (CFO)?
- Does the CFO/executive management team provide appropriate assurances regarding financial matters to the board?
- Are there appropriate internal control systems in the company?
- Are the internal and external audit functions performed appropriately and identified issues properly considered and addressed?
- Am I satisfied that the board’s Audit Committee is effective (in terms of its charter, skills, performance, processes etc)?
Monday, 28 May 2012 10:00
By Donn Berghofer
Corporate Social Responsibility or CSR makes business sense.
By leveraging the unique resources and capabilities of a firm, CSR offers business an immense source of commercial opportunity and innovation.
It enables firms to make a significant and lasting social impact and to deliver a strong business result while simultaneously building long term competitive advantage.
The position, argued by Professor Milton Friedman in the 1970s, that the sole purpose of a company was to earn profits for shareholders is no longer current.
In the 21st century, the winning companies will be those who prove with their actions that they can be both profitable and increase social value.
Page 2 of 4«StartPrev1234NextEnd»
Subscribe here to Directors Australia free quarterly newsletter “Above Board” which summarises developments in corporate governance and other issues relevant to directors.