Transcript Comparing public and private sector governance

Comparing public and private
sector governance
Lynn Ralph
Managing Director, Cameron Ralph Pty Ltd
24 September 2003
Riddle:
What do ‘good governance’ and ‘justice’
have in common?
The advertised topics
dispelling the myth
in common / poles apart
political dimension
lessons learnt from collapses
stakeholder expectations
Uhrig Report
The “Governance Challenge”
Achieve Mission
Manage risk
Keep (competing)
stakeholders happy
.
Who am I?
Domination by Managing Director
Board’s failure to direct and control management
Board accepted poor and voluminous reports
Internal audit not well directed by Audit Comm
Chairman’s failure to lead
No monitoring of board’s performance
Inadequate information, systems, and
procedures;
Board over-relied on mgmt and auditors
Similarities or Differences?
“Viewed at a high level, corporate
governance is all about accountability and
stewardship”
-Report of Royal Commission into HIH
Similarities & Differences ???
Principles of Public Sector Governance
– Accountability
– Transparency
– Integrity
– Stewardship
– Leadership
– Efficiency
ASX Principles
Solid foundation for mgmt & oversight
Structure board to add value
Promote ethical decision making
Safeguard integrity of financial reports
Make timely disclosure
Respect rights of shareholders
Recognise & manage risks
Encourage enhanced performance
Remunerate fairly
Recognise legitimate interests of stakeholders
Similarities or Differences?
Unique context
– Profit Driven vs Mission Driven
– Market position / dominance
– Regulatory (tax, police, ASIC, etc) – see Uhrig
Laws applicable
– Legal foundation upon which directors may act
Full disclosure vs transparency & FOI
Range of stakeholders
Other Regulators
APRA, ACCC, ATO
etc etc etc
Public
ASIC
Stakeholders
ASX
Shareholders
Board
Auditor
CEO
Similarities or Differences?
Degree of control over board selection:
– diversity, political appointments, turnover
– Confusion about who the director represents: the
govt, the org, the constituency they represent
Degree of board control over management
– Ministerial appointment of CEO
Effective management control
– due to high board turnover or poor board skill mix
Significant stakeholder (political dimension)
– Major shareholder vs Minister/Parliament
What makes a good board?
Cadbury
– Openness, accountability, integrity
Cameron Ralph
– All of the above plus:
– Consistently high quality decision making
Critical Components
The right amount, about the right things
Agenda setting, problem scoping, decision
criteria, alternatives, risk analysis
Overseeing implementation; assessment of
board and senior management
What goes wrong ?
Sidney Finkelstein “Why smart executives
fail’
“Denial” the most common reason
– simply not accepting that reality has changed
– How you respond to reality when it doesn’t match
your expectations (escalation )
– How you process information when it doesn’t
match your expectations (love is blind;)
– Not addressing the ‘dangerous’ CEO problem
– We get on ‘so well’….
Uhrig Review of Governance of
Statutory Authorities
Report into HIH comments on APRA structure
The governance of regulators
“Who watches the watchers?”
Riddle:
What do ‘good governance’ and ‘justice’
have in common?
So why is ‘good governance’
as rare as justice?
Directors are human and not ‘all knowing/all
seeing’
Owners often don’t behave rationally
Time frames are increasingly short
Multiple layers of conflicting goals
– balancing all players ‘interests’ is probably
impossible – meaning solutions are probably
flawed!
Thank you!
www.cameronralph.com.au