Good Governance in Credit Unions

Governance Matters

Kate Costello

• understand the role of the Board

• get the right skills and encourage the right behaviour

• introduce effective processes

Effective Governance

Governance is what the Board does or should do to be a “value-adder” to the organisation rather than just a “cost-centre”.It is different from what management does or should do.

Understand the Role of the Board

“The Board’s role is to create the future of the

organisation, not just mind the shop”.

John Carver

What is Governance

The Role of the Board

Accountability Strategy Formulatio

n

Compliance

Roles

Appoint CEO Performance Roles

Monitoring and Supervision

Policy Making

Outward Looking

Inward Looking

Past & Present Future*adapted from Tricker, RI: International Corporate Governance (1994)

p149

Those you can’t say no to!

• the law and regulation• constituent document or empowering legislation • creditors (eg. bank; suppliers)• other contractors (eg government funding; sponsors)

Accountability

Those you need to listen to!

• owners (shareholders; members; government)• customers• staff• the community

Accountability

• “listening” to stakeholders

• risk management• organisational culture

Good Governance in Accountability

• what is “Strategy”? – Michael Porter

• the gut, the head, the heart

• answer the hard questions

What is Strategy

• longer term strategic plan (with measures)

• aligned operational/business/annual plan (with measures)

• aligned budgets

Good Governance in Strategy

• dedicate some board meetings to strategic matters

• spend the first hour on a strategic issue

• reorganise the agenda (decision; discussion; noting)

Good Governance in Strategy

“I define policy as the value or perspective that underlies action. Of course that means everyone in the organisation makes policy including staff members, but boards must make the broadest and most inclusive policies in order to control the organisation. The trick is for the board to make distinctions between the types and sizes of policy, so that what is delegated is clear”.

Carver J: Reinventing Your Board, P41

Policy

Carver argues that the board only has one employee, the CEO.

“The board will:• instruct only the CEO• view all organisational performance as that of the CEO• view any organisational failure to comply with board policy

as the failure of the CEO• require that the CEO keep the organisational performance

within policy criteria and restore it to this state should there be policy violations

• never in its official capacity, help the CEO manage”John Carver

Good Governance in Policy

• Matters reserved for the board

• Policy separated from minutes

• Board Manual

Good Governance in Policy

• By strategic KPIs• By annual KPIs• By compliance with board

policy• By agreeing what information

will come to the board, in what

format

Monitoring and Supervision

• “hire and fire” the CEO• remunerate and reward• assess performance• plan for succession

CEO and Succession

• size of the board• board skill set• committees

the right ones? clear terms of

reference? reviewed, or task

forces?• amend constituent

document to make right

Get the Right Skills

• induction • management update

sessions• expert reports• expert development

sessions• Board and director performance evaluation

Board Member Knowledge

Encourage the Right Behaviour

Board Effectiveness Research

Shey NewittCompliant but not contributing: why Australian boards are being under-utilised

• Chair – CEO relationship critical

• behaviour and teamwork• a “living” Code of Conduct

Working Relationships

• calendar• papers before meeting• clear, concise, precise

papers• duration of meetings• calibre of minutes plus

action list• receipt of minutes after

meeting

Introduce Effective Processes

• understand the role of the Board

• get the right skills and encourage the right behaviour

• introduce effective processes

Effective Governance

Good Governance in Credit Unions

Structure and Skills

• size of board• “fit”: skill set; appointed and/or

elected directors; terms for board renewal

• “proper”: not too bureaucratic

Structure and Skills

• Nomination and Remuneration Committee with independents

• the right committee

Accountability

• communication from, and to, members

• the AGM• relationship with APRA

Accountability

• reports on governance• “capture” corporate social

responsibility

Strategy

• a true differentiation?• mergers• enough time on strategy• longer term plan

Policy

• matters reserved• centralise all board-endorsed

policies• HR and remuneration/reward

policies align with strategy

Policy

• outsourced service providers• user-friendly style• risk management

Monitoring and Supervision

• by KPIs – strategic and annual• by the information the board

receives• by policy compliance reports

CEO and Succession

• CEO or Managing Director?• performance management• annual succession planning

including for CEO direct reports

Leadership and Teamwork

• the right chair• succession planning for the chair• performance evaluation

Meetings

• duration and timing• format for submissions• annual calendar• meeting without management

In Summary

• The right directors and chair• A strategic view• The right processes

Your checklist

Understanding Good Governance in Credit

Unions

Governance Matters

governancematters.com.au