Governance key to NFPs managing nefarious risk
As the RAA ad says, trust is a must.
And so it is the country’s Not-For-Profit (NFP) sector which stands to be tarred, albeit unfairly, by a sweeping brush if it’s governance isn’t tightened up and moved towards best practice.
— Governance Matters (@GovernanceMatt) November 27, 2017
That’s the message I take from a recent report, the first of its kind in Australia, that found that good governance is the sector’s best ally if it’s to counter the risk of money laundering and terrorism financing.
Commissioned by our financial intelligence agency, AUSTRAC, and the Australian Charities and Not-for-profits Commission (ACNC) and entitled ‘ Australia’s Non-Profit Organisation Sector: Money Laundering and Financing Risk Assessment’, the report does stress that the risk is ‘medium level’ and proven instances remain low so it’s both unwise and erroneous to be alarmist. Continue reading
Making sure NFP mergers meet expectation
There’s no doubt the not-for-profit (NFP) landscape in Australia is in the throes of perhaps its most significant change in decades, driven largely by the ongoing expansion of the National Disability Insurance Scheme (NDIS).
— Governance Matters (@GovernanceMatt) November 9, 2017
And there’s no doubt that mergers are high on the list of board actions undertaken to, mostly, make the organisations more attractive to funders and more compliant with greater governance requirements.
But mergers – in the commercial world as much as in the NFP sector – bring their own challenges.
They’re seldom if ever a solution in themselves; rather they’re just one of a number of tools at our disposal, that we can call on and utilise to arrive at the solution.
In pursuit of faster, higher, stronger governance
— Governance Matters (@GovernanceMatt) May 15, 2017
Anyone with even a passing interest in Australian sport will be aware of the ongoing bun-fight between the Australian Sports Commission (ASC) and the Australian Olympic Committee (AOC) when it comes to how well – or poorly – national sporting bodies are doing in terms of governance.
And, more pertinently, what needs to be done about it.
It all started after the less than stellar performance of our athletes at the London 2012 Olympics when governance reform of the various sporting codes – in the shape of the first set of Mandatory Sports Governance Principles – was mooted and subsequently introduced. Continue reading
Asia’s shining stars in corporate governance
— Governance Matters (@GovernanceMatt) November 23, 2016
Okay, here’s a little quiz I suspect you’ll find rather interesting…
The latest Corporate Governance Watch 2016 findings for Asia have just been released, with rankings provided for the 12 key Asia-Pacific markets and over 1,000 companies operating across the region.
Can you name the companies, preferably in alphabetical order?
Just kidding, what I’d like to know is who you think came out tops, who took silver, who grabbed the last remaining spot on the podium and who picked up the dreaded wooden spoon?
Adding ‘foresight’ to ‘oversight’ responsibilities – Part 2
— Governance Matters (@GovernanceMatt) October 17, 2016
Our next trend that needs to be on board agendas is thinking the unthinkable. Astute and visionary boards will consider what’s out there, even potentially out there, that could seriously destroy their hitherto successful business model. They will keep this question in their collective heads day in and day out, forever examining the landscape and quizzing the shifting sands.
And when new marvels like Uber and airbnb suddenly present themselves, as if out of nowhere, you’ll have considered the impacts of such entrants and devised plans and strategies to deal with their presence.
Adding ‘foresight’ to ‘oversight’ responsibilities – Part 1
KPMG’s respected 2016 Global CEO Outlook landed on my desk not that long ago and while it’s packed with interesting information, perhaps most striking was the finding that close on half of all global CEOs expect their companies to transform into a significantly different entity in the next three years.
Of course, this presents opportunities, along with challenges and even threats, the most significant challenge for boards being trying to navigate between their ongoing ‘oversight’ or supervisory role and their increasing responsibility to provide ‘foresight’ when it comes to expectation and likelihood in a murky future littered with unknowns.
— Governance Matters (@GovernanceMatt) September 28, 2016
That’s where strategy, that perennial that must forever and a day be on the board’s agenda, comes in…and, with it, being visionary. And we know that the more diverse a board is in its make-up, the more visionary its strategy is likely to be and, in turn, the more prepared and successful the company can expect to be.
— Governance Matters (@GovernanceMatt) September 28, 2016
A trio of tips so you don’t trip up on your journey to a Board
— Governance Matters (@GovernanceMatt) June 9, 2016
There’s a certain allure about serving on a board and it’s not hard to understand why. There’s the status, the professional development it offers, that special access to other influential business leaders and, of course, a warmth that comes from ‘giving something back’, especially when you’re sharing your talents with the not-for profit sector.
And while the motivators may be many, there are just three stages you need to cover off on if you’re to end up at the right company, on the right board. Let’s call them my trio of tips…
They cover what to do in preparation, what to do to make the approach and those things to consider before saying yes.
Bells set to toll for independent schools governance
If there’s one thing in Australia that’s almost as certain as death and taxes, it’s that what happens in one state or territory, particularly in the area of governance, is bound to send ripples into all others.
Which is why the recent announcement by the New South Wales government of increased requirements for non-government – or independent – schools should get the bells ringing across this educational sector, in every nook and cranny of the country.
People power on the rise as history repeats itself
There I was, trundling along in the car the other day when an interview on Radio National pricked my interest.
There was this chap chatting to Fran Kelly about co-operatives as a modern – and paradoxically, a rather old – answer to the growing trend of governments and businesses exiting from certain services.
He was saying citizens are increasingly coming together to take ownership of the problem or challenge and to do something for themselves.
This time, the joke is on me!
You will recall we had a look at some lighter moments in the boardroom, those generated by the chair and directors, in last week’s blog.
It’s now time to bring our blog program for 2015 to a close and, as promised, we’ll end with the joke being fairly and squarely on me…
— Governance Matters (@GovernanceMatt) November 26, 2015
It’s the silly season so time for a little light relief!
Yes, governance has something of a reputation for being a little dry, but believe me, there’s humour aplenty in the boardrooms of Australia, some of it generated by the members and directors, others by yours truly when consulting to boards.
— Governance Matters (@GovernanceMatt) November 23, 2015
And as most of it is unintentional, it only adds to the hilarity.
So, with the silly season on our doorstep, I thought we’d end the year on a lighter note by getting into the seasonal mood and closing with a two-blog series on boardroom comedy.
In the first blog, I’ll recall some of the funnies I’ve heard in my line of work and just to balance the ledger, I’ll devote the second to a few of my stumbles.
Taxing Times 2 – The Lore
The law behind us, let’s turn our attention to the lore and explore those changes afoot that are being driven largely by a growing global sense of fairness and the notion of good corporate citizenship.
Generally speaking, modern society holds the view that as a company benefits from the people and places where it operates, it should give something back.
Today, there’s very much a social contract to trade in a fair and community-minded manner in every jurisdiction where you happen to operate. And if you don’t, you run a very serious and potentially devastating risk to your reputation.
Taxing Times 1 – The Law
Tax and the taxing times it can potentially cause boards is something I’d like to look at over the next two blogs, spending some time on tax law and some time on tax lore!
Let’s start with the law, particularly the international implications of the various tax regimes across the different jurisdictions and the veritable tightrope boards sometimes need to walk to keep everything kosher with people like the USA’s Inland Revenue Service (IRS) and our Australian Taxation Office (ATO)…both understandably keen for their legally entitled slice of the tax pie!
For most boards of small Australian companies, there’s not too much to concern themselves with. After all, beyond the GST, providing for long service leave and perhaps attending to the odd acquisition, that’s generally as far as it goes.
Five simple steps to social media nirvana
Hi, Talia Hagon here again, to conclude our two-part social media soiree.
Okay, we’ve agreed that a social media strategy that feeds into the overarching corporate strategy is a vital component of the modern organisation. We’ve also accepted that the board must ensure that social media and the social media strategy gets the high priority it deserves if they’re to fulfil their primary role of charting a successful course for the company.
So what next? What are the most important things to consider before you launch your organisation into the dynamic world of social media? Continue reading
Radio Interview on ABC Adelaide with Ian Henscke on how ICAC findings and governance are connected
Our Managing Director, Kate Costello talks with ABC Adelaide’s Ian Henschke on the topic of how ICAC findings and governance are connected.
When it comes to social media, the greatest risk is….
Social media – two words that excite so many but fill others with white knuckle trepidation…and as many of the latter seem to find themselves sitting around the boardroom tables of corporate Australia, Kate Costello has asked me to share my social media thoughts with you.
My name is Talia Hagon and social media is my business. It brings me into contact with countless board members and directors and a startling observation is that many don’t have an understanding of or passion for the digital world.
So in a two-part blog, I’ll explain why boards should insist on their organisations having a social media strategy and conclude with what I believe are the mandatory elements of such a strategy.
The Super Shake-Up Solution
Regular followers of these blogs will recall that we ended last week on a contemplative note, pondering the dilemma facing not-for-profit super funds that might well have to change the make-up of their boards if proposed Federal Government legislation to improve governance in the sector gets through the Parliament.
To recap, the dilemma was that while these funds have tended to perform better than their corporate cousins, arguably because of their ‘we’re here for our members’ rather than ‘we’re here to make money for our shareholders’ philosophy, they’ve also historically had weaknesses.
So how do we retain those vital values while ensuring the boards have the requisite skills and diversity?
The Super Shake-up Dilemma
The Federal Government’s recently introduced Bill aimed at changing the governance landscape at non-profit superannuation funds, key among them that one-third of the directors are independents, as is the chairman, is to me a bit like the curate’s egg.
It’s good in parts, which probably explains the raft of opinions on the subject.
Banks like the model, unions don’t. But then powerful people like former Australian Workers Union boss and Australian Super director turned KPMG consultant Paul Howes likes it too, as does retiring SunSuper chief investment officer David Hartley.
Our states and their states of mind
I’ve often wondered whether we Australians are as parochial as we’re sometimes made out to be, whether our primary loyalty does indeed lie with our state, followed by our country. We’re said to be first and foremost South Aussies or Victorians, Tasmanians or New South Welshmen (and women!), Queenslanders or Western Australians – and let’s not forget our Territorian twins!
If an email I received the other day is any indication, there’s more than a grain of truth in that assertion.
You may recall a blog about two months back when I said the ability of a board to listen to stakeholders is perhaps the fundamental tenet of good governance – and it can be particularly tough, not to mention prickly, in federated member-based organisations where traditionally there’s a balancing act between listening to the regions and having functioning, national entities with effective boards characterised by impartiality and neutrality.
Tapping into advisory boards is an intelligent move
While there has been some debate around the importance or otherwise of advisory boards – and I guess the conclusion ultimately determines their value – there’s savvy aplenty in the general rule that getting added intelligence into the company can never be a bad thing.
Intelligence, of course, is one of the key currencies that separates the great companies and organisations from the good ones (and the not-so-good ones!) and any vehicle that can serve as an astute sounding board and inject some high level thinking into the corporate conversation should be welcomed.
As the name implies, the advisory board is there to provide advice, which can then be used to inform the decision.
The ten steps to Federation nirvana
As we’ve discussed in earlier blogs, the world of federated entities is complex in a governance sense, with regional baggage and partiality just two elements adding to an already tricky landscape.
So I thought it timely and beneficial to devote some time to sharing what I believe are the 10 steps to success for federated entities in the not-for-profit sector.
Firstly, there needs to be a common strategic direction, a plan for the entire country, with each entity’s strategic and annual plans aligning with the national direction and fitting in with the Australia-wide umbrella.
Listen up…here’s the primary tenet of good governance
For most of us blessed with hearing, it’s probably true to say not too many of us are great listeners. Yes, we all hear, but do we really listen?
I pose the question because in the world of good governance, perhaps the fundamental tenet, the beacon that stands head and shoulders above all others in this multi-faceted discipline is the board’s ability to listen – really listen – to its major stakeholders.
The primary stakeholder is, of course, the owner or owners and shareholders of the entity or, in the not-for-profit world, the members.
FIFA’s many own goals…..and our complicity
There are few, if any, organisations on this planet that could have provided us with such a litany of case studies on how not to go about your business as our dear friends – or is that fiends? – at FIFA.
Indeed, anyone who has followed FIFA’s history knows that they’re seldom far from controversy when it comes to business dealings and the organisation’s sorry governance track record. You could say they’re clearly in a league of their own when it comes to scoring own goals.
Which begs the question…why did everyone sit around and do little or nothing until the US regulators started to investigate the organisation and found all was not as it should be?
Getting antsy about ACNC governance standards
It looks like the ACNC may well survive. On 24 June the Senate moved a motion calling on the Government to withdraw the ACNC Repeal Bill. Many see this as good news.
The ACNC is widely applauded but, I have to say, I was disappointed in the set of governance standards realised by the ACNC last year.
That mildly crude old Australian expression of being as useful as a one-legged man in an arse kicking contest came to mind when I first saw the documented standards.
Now I’m not having a dig at the Commission, but…………
The reality of neutrality
The famous Scottish poet, Robbie Burns, once wrote “Oh would some power the gift give us, to see ourselves as others see us” and that’s pretty apt advice when it comes to impartiality – in all walks of life, including the boardroom.
We all like to think of ourselves as balanced, fair and neutral individuals and for the most part, most of us are. But there’s one area of governance where it gets tricky: our ability – or lack thereof – to look at something objectively when facing a decision that might negatively impact on us personally.
Going back a good few years, I was involved with an 11-member board and it soon became abundantly clear that the evidence suggesting a board should never exceed nine members was spot on.
When abiding by the law alone is not enough
It should come as no surprise that one of the key attributes of a good and effective board member is an unswerving commitment to ethical and fair behaviour.
But that’s not as simple and as straightforward as it sounds, especially in a world where what’s lawful may be frowned upon by large sections of society and viewed in a particularly negative light.
It demands of the modern director to be attuned to what’s going on, both when making judgement calls as an individual and as a member of the collective – the board.
Tri is the trick to articulation and persuasiveness
We’ve all come across them in our time, those individuals on boards who fail to be heard by their co-directors.
There are those who simply can’t be heard because they’re as quiet as proverbial mice, seldom saying anything. Then there are those who are so damn garrulous that they find it impossible to pause even at hefty punctuation points, their voices so constant that they soon become little more than background drones.
In a word, both are dispensable – precisely because superior board members make an effective and positive contribution…and you can only do that when you’re articulate. With articulation comes persuasiveness.
Raise your glass to the cocktail of differing points of view!
International governance expert Dr John Carver is on record as having said that just because you establish a group of intelligent, competent and caring individuals does not mean that as a group they’ll make intelligent, competent and caring decisions.
He argues further that all too often it’s because we as human beings lack the courage to say what we really think, for a variety of reasons.
And yet, it’s the cocktail of differing points of view – in life as much as around the boardroom table – that invariably leads to healthy and robust discussion and debate…and generally speaking, great decision-making.
So what is it that prevents us from displaying this courage – and more importantly, how can we rediscover our mettle?
Seven’s the magic number in achieving sound business judgement
A recent survey in Britain revealed that when it comes to numerology, the number seven takes the cake.
Perhaps it’s because the number appears regularly throughout cultures and history – there’s the seven ancient – and modern – wonders of the world, seven days of the week, seven circles of the universe, seven deadly sins and seven basic musical notes.
And so much more, like the ‘The Seven Fs – Tactics to Improve Board Decision-Making’ I’ve recently compiled!
With a sharp mind, you’re a cut above in the director stakes
We all know that most board members are, more often than not, appointed on the basis of the specific skills or expertise they have in the sector in question, along with a strong reputation as a contributor at executive level.
And while that’s likely to ensure the board is populated with good and competent people, it doesn’t necessarily take it to rarified heights.
For that, you need directors with the aforementioned attributes plus a sharp, enquiring mind and an insatiable thirst for learning.
That’s when you get directors who are a cut above…and in turn, a board that’s incisive in every sense.
You don’t have a choice when it comes to care and diligence
And another thing…..effective directors are careful and diligent.It may come as a bit of a shock and surprise to some of you, but being a diligent and conscientious board member is not a matter of personal choice. It’s a whole lot more serious than that…indeed, it is enshrined in our law. And another thing….effective directors are careful and diligent.
Legally, the duty of a director is to display care and diligence at all times, to the extent that they exercise thoughtfulness and attentiveness in their role and have a reasonable grasp of the organisation’s financial position – after all, they physically sign off on the financials – and its operational aspects.
Some may think that’s a rather ambiguous definition, one that’s open to interpretation, and there’s even an argument that we’re dealing in semantics here.
So perhaps it’s best to clear the air and delve into the legal definition of ‘care and diligence’.
When you know your role, the good times roll….
Let’s get started on our Top 10 steps to being an effective director by tackling the first of these which, quite logically, is knowing what our role is and understanding what we’re there to do.
There are two components to this, the first one is knowing what we as individuals are to do and the second comprehending our role as part of the collective, as a cog in the greater wheel that is the board team.
The key to success, like many things, can be found in the detail – in other words, in the quality of the director role description provided.
A 10-step guide to being an effective director
As I’m sure the vast majority of us wish to be the most effective board members we can be and make a positive and lasting contribution to the companies and organisations whose boards we serve on, I thought I’d share our findings on the characteristics needed to do just that.
But before I do, perhaps it’s opportune to have a look at what the celebrated professor of corporate governance at the Kellogg Graduate School of Management at Northwestern University in Illinois, Robert Neuschel, said about the issue.
More to the point, how his findings tally with those we’ve unearthed during our quarter century in the governance consulting arena – and hopefully allow us to arrive at a universal truth.
If you need to ask the question, chances are there’s a conflict of interest
You might recall that in an earlier blog I mentioned how often I’d been approached for advice on how to go about getting on a board. There’s another question that’s equally ubiquitous, only it comes from those already on boards – and it has to do with conflicts of interest and what they should do about them.
My immediate response – and without knowing the full story – is always that if we have to ask the question, chances are there’s a conflict of interest. And wouldn’t it be better if we erred on the side of caution and did it properly?
So what is ‘properly’?
Do the due diligence before you say ‘yes’
It’s a red letter day, you’ve got news that the board post you’ve been chasing has been offered to you – and every fibre in your body is yelling out telling you to say ‘yes’…and to say it now!
After all, it’s the first board position offer you’ve received, you have worked tirelessly for it, your dream has been realised and you’re understandably thrilled at the news.
Sadly, in many such cases, the enormous euphoria tends to trump judicious thinking and rational judgement. It’s pretty much a case of jubilation bashing down the one door while discernment makes a hasty exit from another!
I should know, I’ve been there and I’ve done that – and not without some regret.
Getting on a board takes honesty, discipline and hard work
If I had a dollar for every time someone sidled up to me and asked ‘So how do I get on a board?’ I’d be rolling about in a sea of green bank notes!
Which, I guess, means I should be pretty adept at providing the answer – and that is, there is no magic bullet; rather, it’s a process that requires honesty, discipline and good old-fashioned hard work.
The first step is to answer three questions:
1. Do I really want this?
2. If so, do I have what it takes?
3. And if so, what’s the right board for me?
Thai corporate governance on march to world best practice
My name is Rongruja Saicheua but you can call me Ronnie.
I head up the new Governance Matters operation in Thailand and rather than bore you with my CV, I thought I’d tackle something I hope is far more interesting and perhaps even a little thought-provoking – corporate governance in Thailand and how it compares with Western practices.
I’d say very well, even if it is a qualified ‘very well’.
Yes, there are differences in the nature of our companies, most of which are either family owned or what we call SOEs – that’s State Owned Enterprises. But there are also a remarkable number of similarities and with Governance Matters now present in Bangkok, I’m sure these will soon become greater.
Consultancy Firm Opens Thai Office
South Australian consultancy firm Governance Matters has opened an office in Bangkok, in the process becoming the first independent corporate governance consultancy to operate in south-east Asia, aside from Singapore.
One of Thailand’s leading governance experts, Rongruja Saicheua, recently acquired a stake in the company and will head up the Thai operation.
Founder and managing director Kate Costello said the opening of the Bangkok office will strengthen best practice corporate governance in one of the world’s fastest growing regions.
Lifting ‘corporate governance’ above the world of weasel words
I clearly remember reading Don Watson’s ‘Dictionary of Weasel Words’, in which he highlights all those government- and corporate-speak clichés that, carefully crafted to mislead or misinform, have crept into our lexicon at an increasingly alarming rate.
I remember, too, being somewhat surprised to find the word ‘governance’ sitting alongside gems like ‘negative patient outcomes’ (read: you’re dead) and ‘downsizing’ (read: slashing employment).
But the more I thought about it, the more it made perfect sense – the word ‘governance’ has become rather nebulous and is bandied about by many who don’t actually know what it means…it just sounds good and, more importantly, it makes the person uttering it sound knowledgeable.
So what does it actually mean?
The birth of boards – and who we have to thank
Monty Python tragics will fondly remember the ‘What have the Romans ever done for us?’ moment in ‘The Life of Brian’ and the same can be asked of those we probably love to hate the most – the British.
They gave us – in no particular order of importance – things like cricket, the steam locomotive, the jet engine, the telephone, the television, the postage stamp, the smallpox vaccine, bangers and mash…the list goes on.
And we also have them to thank – or curse – for giving us boards.
Positions For Pals Do Boards a Disservice
You’ll recall in my earlier blog I took a critical – and none too flattering – look at government’s rather feeble track record when it comes to living by the laws it creates and applies to others, especially when trafficking in misleading information.
I mentioned, too, that I had more to say on our pollies and their governance attributes…and I’m afraid it’s no less damning when it comes to them selecting people for board positions.
In the corporate and NGO sectors, boards are doing an enormous amount of good work to ensure that there’s diversity and a balance of skill sets among the people they select to direct the organisation.
Do As We Say, Not As We Do
The sea of election posters that have adorned our streetscapes in recent times – federally last September, SA and Tasmania in March and WA a week ago got me thinking…there’s an awful lot of posturing and pontificating, there are promises aplenty from many of those seeking to win our vote.
But what happens when these pollies get our vote and go on to walk the corridors of power? What happens to all those pledges – and more to the point, what sanctions are in place when words speak louder than actions?
From a governance perspective, it’s an absolute shemozzle, where one set of rules applies to the mere mortals in the corporate and NGO worlds and a totally different one to those in government.
Allow me to elaborate…
Taking The ‘Me’ Out Of SME Can See Your Business Take Off
I’m often asked by those in small business when they should turn their thoughts towards adopting some sort of board structure – and my stock answer is: it’s never too soon.
I intentionally use the words ‘some sort of board structure’ as the SME landscape is a pretty expansive one, dotted with many companies that have succeeded as sole directorships and just as many that have thrived on external skills.
What’s important is that there’s a keen understanding of the divide between strategic and operational needs and the fact that both require focus and attention. And if internal skills don’t allow for this, we need to look outside for these people. Whether they then act in an advisory capacity or are appointed to a more formal board structure doesn’t really matter. What does is that we appreciate the need and are prepared to listen and learn.
How To Prepare Your Business For Growth
You’re motivated, you have a great idea and you fancy your entrepreneurial spirit and as important as they are in launching a new business, I’m sorry to say they’re not enough.
That’s because your success will ultimately depend on having three key elements in place at the outset – an end game in sight, an appreciation of the importance of the right people and a willingness to ask for money.
The end game, of course, is your vision for the company.
When you know where you wish to end up, it’s so much easier to build the structures to take you there. So spend time on this vital aspect and only when you know you have it in sharp focus, turn your attention to people.