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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

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Comparing public and private sector governance

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  1. Comparing public and private sector governance Lynn Ralph Managing Director, Cameron Ralph Pty Ltd 24 September 2003

  2. Riddle:What do ‘good governance’ and ‘justice’ have in common?

  3. The advertised topics • dispelling the myth • in common / poles apart • political dimension • lessons learnt from collapses • stakeholder expectations • Uhrig Report

  4. The “Governance Challenge”

  5. .

  6. 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

  7. Similarities or Differences? “Viewed at a high level, corporate governance is all about accountability and stewardship” -Report of Royal Commission into HIH

  8. Similarities & Differences ??? • Principles of Public Sector Governance • Accountability • Transparency • Integrity • Stewardship • Leadership • Efficiency

  9. 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

  10. 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

  11. CEO Board Other Regulators APRA, ACCC, ATO etc etc etc ASIC Public Stakeholders ASX Shareholders Auditor

  12. 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

  13. What makes a good board? • Cadbury • Openness, accountability, integrity • Cameron Ralph • All of the above plus: • Consistently high quality decision making

  14. Critical Components

  15. The right amount, about the right things Agenda setting, problem scoping, decision criteria, alternatives, risk analysis Overseeing implementation; assessment of board and senior management

  16. 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’….

  17. Uhrig Review of Governance of Statutory Authorities • Report into HIH comments on APRA structure • The governance of regulators • “Who watches the watchers?”

  18. Riddle:What do ‘good governance’ and ‘justice’ have in common?

  19. 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!

  20. Thank you! www.cameronralph.com.au

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