It is hard to imagine any Board member questioning the need for good corporate governance, but identifying the processes and practices required to achieve that aim is not so straightforward.
In an effort to identify the link between governance practices and performance, the Australian Institute of Company Directors commissioned a review of the research into this elusive connection. Amongst the key findings of the review was that:
- Research does not provide any conclusive links between governance practices and performance;
- The outcomes of research are contradictory and provide little assistance in identifying good governance practices; and
- There are no readily identifiable causal connections between governance practices and outcomes.
In summary, the research conducted to date does not help Boards identify governance practices that will lead to the outcomes they want. So, if the academics and experts can’t help, how does a Board, particularly a volunteer Board in the not for profit sector, go about adopting good corporate governance.
Here are five tips to help along the way;
1. Adopt a governance framework or charter
Just because the task is difficult doesn’t mean it shouldn’t be done. There is a wealth of materials available that will provide a starting point including those freely available from the ACNC and other regulators and manuals that can be purchased from professional advisors and consultants. Choose one from a trusted source.
2. Adapt the governance framework to your organisation’s needs
Whilst organisations in the NFP sector might have a lot in common, it is a mistake to assume they are identical. So, make sure that the governance framework suits your needs and is appropriate to your organisation’s size, service sector, and geographical location.
3. Implement the governance policies
There is no point in having the perfect governance charter in a manual that is never taken out of its folder. Ensure that the policies and procedures are implemented and adhered to. This can be worked into meeting agendas and risk management policies as well as annual performance reviews.
4. Assess performance
Just as it is important to review the performance of Board members and staff, an essential element of applying good corporate governance is regularly reviewing your governance framework itself. That includes the various policies and procedures that flow from it. This does not have to be an overly complicated process and can be dovetailed with constitutional reviews. At the least, it should be done whenever a practical problem arises as a result of using the framework.
5. Be sceptical of exceptions
Be wary whenever a Board member or senior manager suggests that ‘this is a special circumstance; we don’t need to follow our usual process/rules this time’. Your governance framework is designed to protect everyone involved in the organisation and every significant decision should be tested against it.
If you would like more information on corporate governance practices or assistance with your organisation’s governance please contact me.
 Ford, G & Rooney, J 2016 ‘Emerging themes of corporate governance and firm performance, AICD Governance Leadership Centre