Good Governance in Credit Unions

Governance Matters Kate Costello

Effective Governance

• understand the role of the Board • get the right skills and encourage the right behaviour • introduce effective processes

Understand the Role of the Board

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.

What is Governance

“The Board’s role is to create the future of the organisation, not just mind the shop”.

John Carver

The Role of the Board

Outward Looking

Accountability Strategy Formulation Compliance Roles Appoint CEO Performance Roles

Inward Looking

Monitoring and Supervision Policy Making

Past & Present Future

*adapted from Tricker, RI: International Corporate Governance (1994) p149

Accountability

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

Good Governance in Accountability

• “listening” to stakeholders • risk management • organisational culture

What is Strategy

• what is “Strategy”? – Michael Porter • the gut, the head, the heart • answer the hard questions

Good Governance in 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)

Policy

“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

Good Governance in 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

Monitoring and Supervision

• • • • By strategic KPIs By annual KPIs By compliance with board policy By agreeing what information will come to the board, in what format

CEO and Succession

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

Get the Right Skills

• size of the board • board skill set • committees  the right ones?

 clear terms of  reference?

reviewed, or task forces?

• amend constituent document to

Board Member Knowledge

• induction • management update sessions • expert reports • expert development sessions • Board and director performance evaluation

Encourage the Right Behaviour Board Effectiveness Research Shey Newitt Compliant but not contributing: why Australian boards are being under utilised

Working Relationships

• • • Chair – CEO relationship critical behaviour and teamwork a “living” Code of Conduct

Introduce Effective Processes

• calendar • papers before meeting • clear, concise, precise papers • duration of meetings • calibre of minutes plus action list • receipt of minutes after meeting

Effective Governance

• understand the role of the Board • get the right skills and encourage the right behaviour • introduce effective processes

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

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