ABOVE BOARD
Winter Edition

DIRECTORS AUSTRALIA HAS MOVED OFFICE!

On the 19th of May we moved from our offices at 360 Queen Street, to just around the corner at 97 Creek Street. Our website, email, and GPO Box number all remain the same but our telephone and fax number have changed. They are ph: 3221 5107 and fax 3221 5187. We are on the ground floor of 97 (which has the Saffron Restaurant out the front) and are sharing office space with Management Effect. We don’t have our signage up yet but if you are coming to visit, just look for theirs – you can’t miss it!

IMPROVING BOARD EFFECTIVENESS

Over the years we have conducted many Board reviews and from this have identified some of the key factors that will help in improving effectiveness of any Board of Directors. I thought we would share these with you for consideration by your Board.

1. Selecting the right people to join the Board in the first place.
2. Providing an informative induction process for new Directors.
3. Monitor the Board and CEO interaction.
4. Have an effective Chairman who can conduct Board meetings.
5. Stay focused on the Agenda and get decisions made.
6. Ensure there is provision in the budget for ongoing Director training and development.
7. Ensure that any Board Committees know what they have to do.
8. Make sure the Agenda is the Board’s and not the CEO's.
9. Have a Company Secretary who knows what they’re doing.
10. Keep management/operational issues out of Board meetings.
11. Agree on a Board Calendar for year ahead and make it non-negotiable once agreed.
12. Conduct an annual review of the Board's performance and processes.
13. Make sure the Board spends a good part of its time on "future thinking" (i.e. strategy).
14. Provide a Corporate Governance Manual or Directors' Handbook to each Board member.
15. Remember the Board is there to represent the Shareholders/Members interests first and foremost.
16. Ask yourself "What is the purpose of this Board, and are we fulfilling this purpose".

TOO MUCH REGULATION?

There are some who will argue that we have become too prescriptive in our regulation of companies and their Directors in Australia. No doubt the government has responded to well-known corporate collapses in recent years by more and more regulation. Some would argue that this has a negative impact on Directors being able to produce the best returns for shareholders. As well as this there are significant financial costs for companies in meeting some of the regulatory requirements in operating companies today. I have collected thoughts from a wide range of people about what needs to be done to address Australia’s regulatory blow-out. These are suggestions only, but I’m sure most Directors would consider them as common sense.

• Ensure uniform business laws.
• Establish a national independent Drafting Agency.
• Adopt consistent Derivative Liability Provisions.
• Reform the regulatory reform process.
• Establish an authority to oversee new regulations.
• Establish a single commencement date for all new laws throughout the year.

In encouraging a softer degree of regulation, it has been suggested that the following could occur:

1. Encourage regulators to understand business better.
2. Achieve greater consultation between regulators and the business sector.
3. Encourage regulators to consider the cost to business of their actions.

While we all understand the need for laws to regulate society, we have to be careful that they don’t reach a point where they choke enterprise completely.

BOARD MINUTES

I’m often asked what should be included in the Minutes of a Board meeting. My response is that you should always remember that the Minutes of a Board meeting could be a letter written to a judge you haven’t met yet! There is an old saying that Boards can "Take Minutes and waste hours". In summary, the Minutes of a meeting should be an accurate recording of the discussion and decisions made by the Board. This does not mean that every word has to be recorded, or indeed too much detail about the information considered in reaching the decision. These are included in the Board Papers anyway and a set of these should be kept by the company (some Directors like to keep all their Board Papers in case they need them in the event of any future litigation).

Three things to watch out for are:

1. Over wordiness. Don’t let the real substance of the discussion or decision get lost in too much detail.
2. Undue brevity. We don’t want Minutes that are so lacking in detail that they don’t really represent anything. For example, you don’t record decisions only, and you do need some brief background information as part of the Minutes.
3. Inaccuracy. The Board should be sure before they confirm the Minutes at the next meeting, that they are a true and accurate record. With this in mind, the draft Minutes should be issued to all Directors within 48 hours of the meeting. This allows people to remember if they are correct or not, and suggest any amendments. Any decision on changing them, based on these recollections, can be agreed at the confirmation of the Minutes at the next meeting. You may also wish to include initials of people who are responsible for the decisions made so that they can start acting on those matters as soon as they receive the draft Minutes. There is no doubt that taking Board meeting Minutes is a real art. It’s probably a worthwhile investment to make sure that you have somebody who is capable of professional Minute taking to assist the Board in this matter.

BANKING ADVICE

I was pleased to see one of the big four banks put out an article recently with their top ten small business tips for SME businesses. This is based on the understanding that risk management is a vital component of today’s best businesses. Because business is cyclical by nature, using risk management financial tools can protect the business against the ups and downs we all experience. Their tips were:

1. Protect your assets through adequate insurance cover or placement of assets in separate entities.
2. Review and reduce your exposure to changes in business costs.
3. Have a good understanding of your cashflow and continue to improve inventory/debtor/creditor controls.
4. Review your transactional systems to provide operational efficiencies and lower bank fees and charges.
5. Consider alternative financing techniques such as off balance sheet leasing or HP arrangements. Ensure debt terms are consistent with the life cycle of the asset being financed.
6. Manage financial risk management. These include attention to such things are foreign exchange and commodity markets, as well as interest rates globally and locally.
7. Consider investment strategies to maximize surplus funds that are not required for immediate operational use. These include high interest IBD facilities or off-set lending arrangements.
8. Manage your tax effectively and communicate with your accountant on a regular basis.
9. Talk regularly with your banker or financial advisor. They should be kept aware of potential expansion plans, or changes in business direction, to provide advice to you.
10. Develop a succession strategy for selling or passing the business on to future generations. This may include diversifying personal assets outside of the business.

NOT FOR PROFIT

An organization that is doing a great job in the Not for Profit sector is the Not for Profit Network. You can see their webpage at www.nfpn.com.au. Directors Australia is listed as a sponsor and governance supplier to Not for Profit organizations, and they run a number of interesting events around Australia for Not for Profit organizations on a range of topics. For those Directors of Not for Profit organizations, it’s worth exploring potential membership and getting involved with their activities. They are a very enthusiastic team of ladies who run the organization, and I think it makes a great contribution to the Not for Profit sector.

BOOK REVIEW

Two different books for two different sectors:

• "The Governance of Public and Non Profit Organizations". As the title implies, the book is directed at Boards in these particular sectors and raises specific issues in relation to the performance of public sector and Not for Profit organizations. It is a 259 page paperback and at $76.00 is not cheap, but is a useful publication for Directors operating in these areas.
• "Inside the Boardroom". The subtitle of this book is “How Boards Really Work and the Coming Revolution in Corporate Governance”. Based on a five year study, this book goes behind the scenes to reveal how Boards really work and what they need to do with the continuing changes in Corporate Governance in Australia and internationally. It is 288 pages in hardcover, and at just $60 is a good buy for any Director with time for some more reading.

I hope you enjoy the winter season and the cooler weather, and find our Newsletter of interest. Please feel free to pass it on to other colleagues who can simply subscribe for free through our website to receive future editions. If you click on Newsletter, you are also able to read back copies of “Above Board” at any time.

Until next time ………
Warren Tapp

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