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Public Sector Boards Update 2009
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Public Sector Boards Update 2009

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A deeper understanding of the nature and operating context for public sector boards is essential for addressing issues of corporate governance in the public sector.

A deeper understanding of the nature and operating context for public sector boards is essential for addressing issues of corporate governance in the public sector.

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  • Boards have been around a long time. Many people taken them as a given, without understanding why they are there. To gain a deep understanding of governance, we need to look beyond the processes. This Module will take us into some of the underpinnings for public sector governance, and some of the challenges.
  • How many board do you think there are in the NSW public sector? Generate a brief description to explore their understanding of what boards are, to warm them up to the discussion to come shortly. Talk about the performance audit findings, and why it might be that there is no simple listing.
  • Talk about the “iceberg” effect re board costs, to get them to appreciate how much it can cost. Refer to performance audit findings that all corporate and administrative structures impose costs: both direct and indirect. Leaving out small committees and trusts, we counted around 600 boards in 1997. The costs of operating these boards was in excess of $73 million pa in 1997.  
  • The purpose here is to generate a deeper understanding of the underlying rationales for Boards (which sets us up to look at why there are so many different governance structures) Many people take Boards as a given, as the starting point in their thinking. But this is a mistake. Boards are not an end in themselves, they are a means to an end. But what end? In doing this, I especially want to draw out the following notions/concepts governance is really about accountability (they may like to debate or argue this) But accountability to whom, and for what? (talk about the notion of “shareholders” for both public and private sectors) Then go to next slide to start unpacking the peculiarities of the public sector governance framework
  • Touch only briefly on the standard doctrine (unless they are not familiar with it) Move onto getting them to suggest how this translates into governance. The point I am trying to make is that having statutory powers exercised by a normal departmental structure COULD open it up to accuastions of political interference. Why would this be a problem, when it happens for Departments? Engage them in a conversation, using examples to bring out the points. Examples can include: Integral Energy (large, public utility), Sydney Harbour Foreshore Authority (small, commercial), Motor Accidents Authority (small, licence granter), Harness Racing NSW, Dentists Registration Board (small, regulators) The exercise of statutory functions is a unique feature of government. Nothing similar exists in the private sector. It can involve considerable public funds, and/or power over the community. There is a distinct “ 1984” aspect to this, and desire to ensure transparency and probity, and to avoid maladmistrations(abuse of power) and corruption. In the pubic sector, many Boards are set up to separate government from the day to day operation of the activity.
  • Another distinctive feature of the public sector is the incredible size and diversity of its functions. No global corporation has anything like it. Get them to talk a bit about this. In2 007, Aust GTEs alone numbered 86 and represented assets worth $192 billion and accounted for 1.7% of GDP (Productivity Commission) Whilst its not part of my focus here today, I would just like to refresh the record with my view that it was not apparent to us that all boards and committees added sufficient value to justify their costs. We proposed some criteria against which value-added might be reviewed in detail to better judge whether all of the 1000+ were warranted.. We estimated that up to 30% of advisory boards might be rationalised, saving over $12million pa.   You would surprised to learn that, that sort of review didn't really eventuate, and few boards have been lost to us. Obviously they must all be adding great value and can't be dispensed with, so my perceptions must have been wrong. Except that …. DPC have just now announced that they are proposing to do such a review, for the very same reason --- only 12 years later!
  • We have begun to explore some of the distinguishing features of the public sector. The question is, does public sector governance end up being any different to the private sector? And if so, why?
  • There's a well-worn saying that life in the public sector is like living in a goldfish bowl. That's usually cited as a bad thing. And therein lies our first problem to address.   It's not a bad thing. It’s a fundamental aspect of public sector reality, and understanding it is critical to being able to adopt accountability as your governance foundation, which it needs to be.   Now be brutally honest. Would every member of your board, and every member of the agency’s executive management, be fully clued up about this, and totally supportive?
  • The notion of Parliament, and Government, and how these add extra layers in the accountability framework between the board and the “shareholders”. Get them to understand the necessity of this, and the challenges it presents.
  • Continued - now to focus on the Government Explore the function of Cabinet (and Caucus) Then generate a discussion on the central issue of the role of the Minister – in three contexts: their role in the Government; in the Parliament; and then how this affects their role with Boards. Go “beyond the simple principles” Contrast this with our earlier discussion about separating the exercise of statutory functions from the government.
  • Get the Class to work up a list of regulators. Such as: Auditor-General ICAC Ombo Privacy Commissioner Health Care Complaints Comm Etc etc etc Generate an awareness of the extent of their power, and then relate this back to the goldfish bowl analogy. Compare how this compares to the environment for the private sector regulatory framework
  • Discuss ultra vires Woolworths example of opening petrol station chain Vs Utilities operating overseas
  • Quick intro to models (see Module notes) CAC Act vs SOC Act vs GTEs (NSW). Ask for questions, then move onto next slides to show some specifics
  • Explain and discuss
  • Explain and discuss
  • Give out Handouts for: Architects Board Game Council Powerhouse Museum Teacher Housing Authority ---- but HOLD OFF getting to the central issue of conflicts of duty (coming up shortly) Just focus on the sometimes bizarreness of their role and composition Then do Question A from the module
  • Move on to Question B from the module
  • Use the examples in the Handouts to highlight the problem of Board being structured to address stakeholder liaison and see if they can suggest alternatives (such as the ABC Consumer Council idea)
  • Discuss the difficult balancing act for CEOs and provide examples (such as mine ) Employed by whom? Contract with whom? Discuss comparison to private sector (any?)
  • How is the issue of clarity around the role of the Minister addressed? Discuss the situation fin most enabling leglstaion. Discuss for SOCs (written directions -- really?) Discuss GTEs. Discuss MOU idea etc. (Hunter Water, Broken Hill Water Board)
  • Touch on this very quickly only. Refer Module Notes.
  • Just update them Barry might want to cover Uhrig in some more depth – but otherwise just bring out main principles.
  • Transcript

    • 1. Graduate Diploma of Applied Corporate Governance Public Sector Boards Guest presenter: Stephen Horne Managing Director, IAB Services (NSWG)
    • 2. In the beginning
    • 3. And they went forth and multiplied
    • 4. Governance has costs
    • 5. Let’s start by talking about why boards are created
      • Board are a means to an end, not an end in themselves
      • You know WHAT governance is. But let’s debate the WHY.
    • 6. The separation of powers
      • The standard doctrine (refer Parliament link)
        • Legislative
        • Executive
        • Judicial
      • Discuss application of the doctrine to statutory powers and functions
        • Reason for Boards
    • 7. Lots of functions & roles
    • 8. It’s all the same …………..… right?
    • 9. The Public Sector … life in the goldfish bowl ... The Real Meaning of Transparency
    • 10. Key differences for the public sector governance framework
      • Parliament
        • the Westminster concept
        • the Washington concept
        • the Chambers
        • the Committees
          • Differences between States, and with the Commonwealth
    • 11. Key differences for the public sector governance framework
      • Government
        • the concept
        • the Cabinet / Caucus
        • The Minister
          • in the Government
          • in the Parliament
          • consequences for a Board
    • 12. Key differences for the public sector governance framework
      • The number, role and powers of regulators
      • Quick quiz
    • 13. The Limits of Power Let’s discuss
    • 14. Public Sector Board Models
      • Commonwealth
      • New South Wales
      • Reference source for detailed dissection of roles and features (NSW Audit Office)
    • 15. SOCs vs. GTEs
    • 16. SOCs vs. GTEs
    • 17. Public Sector Board Models
      • Regulatory and other
      • Some examples (handouts – discuss)
      • (Question A)
    • 18. Roles & Relationships
      • Question B
    • 19.  
    • 20.  
    • 21. Where is the clarity (safety net)?
      • In Legislation?
        • Enabling
        • Governance (SOCs, CACs)
        • NSW GTEs?
      • What else can you do?
    • 22. Internal workings
      • Board Committees
        • Audit & Risk Committee
        • Remuneration Committee?
        • Others?
      • Performance
        • Statement of Corporate Intent
        • Personal reviews
    • 23. Directions for Change
      • NSW Audit Office recommendations (1997)
      • NSW Review of Boards
      • NSW Better Services & Value Plan (2009)
        • Full value potential
        • Capital performance & management systems
      • Uhrig Review
      • Building Better Governance, APSC (2007)