The ten commandments of good governance
Due to the constant pace of legal and regulatory reform at state, territory and federal levels in Australia (which shows no sign of abating!) schools can be forgiven for remembering 2017 as the year of legal compliance. The often confusing statutory drafting by different parliaments causes headaches not only for lawyers but for other organisations such as schools who must try and understand the wording to meet their obligations under the Acts! But it is also crucial for school governing boards to take a step back from legal compliance and remember the importance of complying with corporate governance principles and procedures which helps schools meet their legal obligations. Using the Australian Institute of Company Directors (AICD) Good governance principles and guidance for Not-for-Profit Organisations (the AICD Guide) we discuss the 10 principles of good governance from the AICD and how they are useful reminders for NFP entities such as schools on the importance of good governance at the board level.
Ten principles promoting good governance
The AICD Guide recommends 10 principles (which can be considered to be similar to commandments) that provide a useful starting point for NFP boards when considering what constitutes good governance within an NFP organisation, such as a school.
1. Roles and responsibilities
There should be clarity regarding individual director responsibilities, organisational expectations and the clearly defined board roles.
Awareness of board members’ responsibilities and expectations is key, so that individual directors or board members are effective in their roles and duties. The AICD states that it is inappropriate and unwise to have individuals join boards and expect that they should know, “innately” or through “osmosis”, what is expected and how a board operates. The AICD also recognises that this is the case for individuals appointed to a board who have none, or relatively little, experience on boards, but are drawn to a school and are prepared to serve on a pro-bono basis. Therefore, to avoid any confusion, schools should clearly define a board member’s role by setting expectations in a letter of appointment or engagement (consistent with the school’s constitution). The letter should set out details such as:
- how they are nominated or appointed and from what date
- their role, responsibilities and duties
- the term of their appointment and any conditions or limits
- expectations in relation to their governance role, potential advocacy, conflicts of interest, fundraising and any operational or public profile activities
- any induction processes.
2. Board Composition
A school board needs to have the right group of people. This means having particular regard to each individual’s background, expertise, experience and how the addition of an individual builds the collective capability and functionality of the board. This commonly is also legally required by registration requirements in most Australian states and territories. For example, the Education Act 1990 (NSW) requires NSW non-government schools to have board members (or “responsible persons”) and governing bodies to have the required experience and expertise in administering a school and providing an education at a school.
According to the AICD, boards that have an appropriate and diverse range of skills and experience will be less likely to engage in “group think” or to have “blind spots” and may be better equipped to deal with any issues that may arise. This can be determined at the time of recruiting the board member and outlining any expectations in terms of board appointment.
For more on board composition please refer to our previous School Governance article: School Board Composition – should your board adopt a diversity policy?
3. Purpose and strategy
The school’s board plays a pivotal role in establishing a vision, purpose and strategy of the school so it can understand and provide direction or plans for the school.
It is critical for school boards to clearly define the purpose and strategy of their school, and in doing so, they need to answer the following questions:
- Why it exists?
- What it does?
- For whom it does things?
- How it aims to do things?
- How it will measure its success?
For schools this may seem obvious but without appropriately answering those questions, there will be no clarity and therefore no purpose or strategy, as to how a school is run. Of course, a school’s purpose and function can be recorded in the school’s constitution where it determines:
- the school’s vision and purpose
- strategic objectives aligned with the purpose
- working with management to set plans that align with the school’s vision, strategy and objectives
- supporting management in its implementation of the plans
- monitoring and evaluating the degree of success against these plans and objectives.
4. Recognition and Management of Risk
By putting in place appropriate systems or risk oversight and internal controls, schools can help to increase the likelihood that their school will deliver on its purpose.
Risk is another board responsibility. Schools should establish a sound system to determine risk appetite, oversight, recognition, management, treatment and control. The use of tools and methodologies such as Risk Management – Principles and Guidelines – AS/NZS ISO 31000:2009 can be used to help manage risks within a school. There are a wide range of risks that schools need to consider such as:
- staff and employment issues
- physical spaces and equipment
- legal and compliance risks
- record management
In response to these risks, boards will need to:
- identify the risk
- analyse the risk and effect of that risk
- establish the school’s risk appetite
- prioritise the risk
- develop a risk register
- implement strategies to manage risk when appropriate
- regularly review processes to regarding assessing the risk within the school.
For more on Risk management please refer to our previous School Governance article: Risk Management 101: What is ISO 31000?
5. Organisational performance
The degree to which a school is delivering on its purpose can be difficult to assess. This can be aided by the board determining and assessing appropriate performance categories and indicators for the school.
The AICD says that it doesn’t matter whether a school is for profit or not-for-profit, it is important for boards to consider the degree to which the school’s available resources (human, financial, physical or intellectual) are being utilised and managed in an efficient and effective manner to achieve expected outcomes. Once a school has decided on its purpose and related strategies, it is common for a school to create strategic planning processes to choose measures or to track progress (i.e. key performance indicators (KPIs)) to measure a school’s performance and to determine if the school is appropriately executing its strategies and achievements for its purpose. This can be achieved utilising financial and non-financial indicators which can be understood by the board, so performance can be accurately determined.
6. Board effectiveness
A school board’s effectiveness may be enhanced through:
- careful forward planning of board-related activities
- board meetings being run in an effective manner
- regular assessment of board performance
- assessment indicators for the school.
To improve board effectiveness, the AICD recommends that the directors/board members consider:
- appropriate board structures
- planning activities in advance
- running meetings efficiently
- assessing board and director’s performance regularly
- effectively utilising board sub-committees
- board succession planning.
Having a compliance program in place that will appropriately address matters listed directly above, will assist school boards to run effectively and efficiently. This will also assist boards to document everything that is required of board members and clearly define roles.
7. Integrity and accountability
It is important for school boards to have in place systems whereby:
- there is a flow of information to the board that aids decision making
- there is a transparency and accountability to external stakeholders
- integrity of financial statements and other key information safeguarded.
The flow of appropriate and timely information will assist with the foundation of a healthy board and create an essential for good governance within a school. It will also create an effective working relationship between the directors and senior management of the school and facilitate transparency and accountability to stakeholders.
8. Organisation building
A school board’s role is to enhance the capacity and capabilities of their school. As part of the board’s role, it is fundamental that the board serve in the best interests of the school to ensure the school develops, implements strategies and supporting policies to enable consistent performance and operation to complete the objectives of the school harmonious with its constitution.
To enable adequate performance, schools will need to address certain matters so key milestones can be met. These include, but are not limited to:
- implementing an effective leadership group
- staff training to fill any skills gap
- regularly assessing employees’ abilities to do jobs and tasks
- having appropriate policies and procedures for efficient operation – such as policies relating to student duty of care
- allocation of resources (financial and non-financial) within the school.
9. Culture and Ethics
The school’s board sets the tone for ethical and responsible decision making throughout the school. A school’s culture and ethics shapes core beliefs and behaviours of the school. It can be summed up as “how we do things around here.”
A culture of a school influences how a school interacts and builds relationships with stakeholders and its reputation. A school culture must be created and nurtured from the top (the board) down. It is renowned that the culture of a school is influenced by the conduct and actions of the board and individual directors. As the ancient Chinese saying goes, “the fish rots from the head.”
Sometimes this can be aligned with its strategic objectives and help deliver on its purpose. Culture even impacts all the way down the school’s food chain and directly impacts on the activities and success of a school. This can include the effect it has on staff morale, absenteeism, ability to attract and retain staff, the level of risk taking (including reputational) and potential exposure to legal or regulatory action.
School Governance has written many articles regarding school culture and the importance of the board’s role in developing and maintaining it. One example may be found here.
Engagement with stakeholders, no matter what industry, can affect a school’s interests or concerns, influencing actions objectives and policies. A stakeholder is someone who has a vested interest in a school. For schools this can include:
- parents and families
- directors/board members
- the broader school community.
Engagement with stakeholders can be as simple as sending emails, school newsletters or even a phone conversation to determine the perspective of the stakeholder. To maintain successful stakeholder engagement, schools need to actively engage with stakeholders and discuss with them why their school was established and what it does to build a mutually beneficial relationship with them.
Continual engagement with stakeholders matters because it provides a useful avenue for information for the board as to how the school can improve, build relationships with stakeholders and increase the likelihood for a school to deliver on its purpose and objectives. Has your school audited its communication risks in the last 12 months?
About the author
William Kelly is a School Governance reporter. He can be contacted here.