Governance is the system by which an organisation is controlled and operates.
It includes frameworks to hold people to account for compliance, risk management, performance and integrity.
Your board’s role in governance is to:
Governance is different to management. Management describes your entity’s CEO and executive team and how they run and manage your entity’s day-to-day work.
Your board monitors the CEO against key performance indicators. The CEO oversees and ensures management performs in line with the direction that your board has set.
Your board’s role in governance is broad. You will need to develop strategies, manage risk, engage with stakeholders and make decisions.
Board members are a fiduciary. A fiduciary is someone who holds trust with people.
Board members have a fiduciary duty. This means a board member has a duty to act honestly, in good faith and to the best of their ability in the Victorian community's interests.
Board members must also behave with due diligence. Due diligence means taking reasonable care before making agreements.
To support your board’s role in governance, you need to:
Governance in the public sector is built on:
We’ve listed some of the important things here you need to be aware of to support public sector governance as a board director.
You can also refer to the Governance Institute of Australia’s Governance principles for boards of public sector entities in Australia for further information.
Applying these governance principles in the context in which your board operates may require additional consideration. For example, Better Regulation Victoria has produced Supporting Best Practice – A companion paper for regulator boards and chairs to support boards of regulators to apply these general governance principles in the regulatory context.
The Public Administration Act 2004 sets basic governance standards and obligations for most boards, directors and chairs.
Even if these standards don’t apply to your board, they are good practice to follow.
The Act says your board’s duties are to:
You also have duties as a board director. These are to act:
You must also declare actual, potential or perceived conflicts of interest.
As a board director, you must use your position and any information you acquire through your board duties for its proper purpose.
Never use your position or knowledge to gain an advantage for yourself or others, or to cause damage to your public entity.
Read more about how public sector duties compare to private sector duties.
The Code of Conduct for Directors of Victorian Public Entities is based on the 7 public sector values.
It sets the standard of behaviour expected of you from the date of your appointment.
If you don’t comply with the code, it may be considered misconduct. In serious cases, you could be suspended or removed from your board.
If you breach your duties as a director and cause loss or damage to your entity, you may face legal action.
But if you have acted honestly and properly, you may be:
Check with your entity to see if you’re covered by an insurance policy and what it covers (usually called Directors’ and Officers’ insurance).
You can also read more about cover for claims against board members at the Victorian Managed Insurance Authority.
Accountability is an important part of public sector governance.
Your board is accountable to your minister for the exercise of its functions.
The minister is accountable to parliament for:
The government is accountable to the Victorian community through the process of elections.
Your board is accountable to the Victorian community for the service the public entity provides to them. Your board has an important role in promoting public trust.
Boards and entities are also required to provide information to departments. This supports the secretary to oversee entities on behalf of the Minister.
Your board must:
If your board needs advice on what you need to provide and when, speak with your department.
Board members should be aware that public entities are subject to scrutiny from integrity bodies including:
Engaging with your entity’s stakeholders is part of your board’s role.
It helps you improve:
Your entity will likely have a wide range of stakeholders.
Your minister and portfolio department are 2 stakeholders your board will communicate with regularly.
Other stakeholders may include:
Your board and management need to work out how to communicate information and decisions to stakeholders.
A good way to do this is with an agreed stakeholder management plan.
Good governance is essential to promote public trust in your entity.
It also helps your entity be more effective, efficient and responsive.
There are 6 pillars that support your board to achieve good governance in your entity.
Your board must define and understand the roles and responsibilities of:
As part of your role in governance, your board:
Your board must ensure your entity has a system in place to identify and manage risk.
Read more about defining your organisation's risk appetite.
Your board needs to have the necessary skills, knowledge and experience to fulfil its role.
To achieve this, you need to assess your board's performance each year to identify:
Your board should include a diverse mix of people as directors.
In most cases, your minister will appoint people to public boards. For future recruitment, your chair can raise any gaps with your portfolio department and minister.
For more guidance, read diversity on Victorian Government boards.
Your board's behaviour, processes and decisions need to be guided by the 7 public sector values.
Decisions should be informed, consistent and balance the views of different stakeholders.
Everyone on your board must comply with the Code of Conduct for Directors of Victorian Public Entities.
Your board must be effective and efficient, in line with your entity’s functions and objectives.
The laws or document that established your entity and other binding laws or policies define the boundaries of what your board does.
Your board’s governance scope should be clearly documented in the board charter or by-laws. These documents set out the board’s terms of reference.
Within these boundaries, your board's role is to:
Your chair’s role is to:
Your chair plays an important role in ensuring a welcoming and inclusive board culture. Your chair should send a welcome letter to new directors covering the director’s:
If your minister wasn't involved in a director’s appointment, the welcome letter may also be the letter of appointment. In this case, ensure the chair informs the minister as soon as possible of the new appointment.
If you’re on a board for a large or complex entity, you may have a board secretary.
They’re not a board director, but have a role to do administrative tasks like:
To do their job well, your secretary needs to understand:
With this knowledge and under your chair’s direction, the secretary may also have governance responsibilities.
They may do tasks like:
Even if you have a board secretary, your board is responsible for complying with its obligations.
Your CEO’s role is to manage and run your entity in line with relevant laws and government policies and your board’s decisions.
In a large or complex entity, your CEO may need to appoint a chief financial officer.
But your CEO remains responsible for your entity's financial accounts and providing your board with financial information.
Your CEO’s responsibilities are to:
Your minister’s role is to ensure your entity acts in line with its obligations and functions properly and advances the government's agenda.
They account to parliament for:
Your minister has the power to:
In some cases, Cabinet may have a role in these decisions.
Your portfolio department’s role is to advise your minister about your entity. This includes how your entity performs and any emerging risks.
Your department’s responsibilities are to:
In some cases, there may be legal or confidentiality reasons that stop a public entity from giving their portfolio department certain information.
Depending on your entity, your board may either:
The CEO leads your entity and is accountable to the whole board but not individual directors. They support your board in its governance role.
The CEO is the link between your board and your entity’s employees, in that they:
Depending on the law or documents that established your entity, your CEO may also be a member of your board.
When they take part in board duties, their title is executive director. Outside of these duties, they are still the CEO and lead your entity’s management team.
When they are in board meetings, they may need to remove themselves for some matters to deal with conflicts of interest. For example, they would need to leave the meeting if your board discussed their salary or performance.
If your CEO doesn’t sit on your board, they attend meetings at the request of the board. There will be many issues that your board requires the CEO’s advice on. The board will also need to have discussions that the CEO should not take part in.
In all cases, your chair and CEO need a strong relationship based on mutual respect, trust and understanding of each other’s role.
Your board is accountable to your minister for the exercise of your public entity’s functions.
It may be useful for your board to brief your minister or their office after board meetings.
A briefing can occur through a meeting or a written report providing a summary of key issues discussed and outcomes. The frequency of these briefings will depend on the size and risk profile of your entity and any requirements specified by your minister.
Your board may need to take direction from your minister, unless this is prevented by the laws or document that established your entity.
Your board does not take direction from your portfolio department.
Your portfolio department and entity need a strong relationship to best serve government.
Depending on your entity, your board will either liaise with:
Ask your portfolio department if they have any resources to support your board, such as the Department of Health's Directors’ Toolkit