What is governance?

Governance defines relationships between the Board and senior management, the Minister, stakeholders (including consumers), and others interested in the affairs of the public entity, including regulators and auditors.

Governance encompasses authority, accountability, stewardship, leadership, direction and control exercised in the organisation.

i sit on a committee of management – does this guide apply to me?

This guide is for use by public entities as defined in s.5 of the Public Administration Act 2004. These are bodies wholly owned by the State, or which are created to perform a public function on behalf of the State under an Act of Parliament, or by the Governor in Council, or by a Minister. They include a body corporate in which the Governor in Council may appoint a majority of the directors. The definition excludes bodies including informal advisory committees (that do not have terms of reference, reporting requirements and have not been declared a public entity under this provision by the Governor in Council), public entities that are a "special body" as defined by s. 6 of the Public Administration Act 2004,, and exempt bodies such as courts, universities and local councils as listed in s. 4 of the Public Administration Act 2004.

What skills should the Board look for in making appointments to the Board?

Examples of skills, qualities and experience the Board may wish to include are:

• a high degree of integrity and standing in the community
• demonstrated honesty
• tolerance of different views
• risk management and audit skills
• business and strategic thinking, planning and leadership skills
• experience and skill in dealing with stakeholders
• an understanding of the broader policy context of the business of the public entity
• ability to read and understand financial statements

Skills and qualities

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What do I need to know if I want to become a Board member?

You should find out as much as you can about the Board, its functions and the expected workload.

The minimum information you should seek is:

• the recent history of the public entity
• its vision and strategic directions
• the profile of Board members and staff
• an outline of the public entity's operations and achievements
• your legal obligations under common law and under other relevant legislation such as the Public Administration Act 2004, the Corporations Act 2001 (Commonwealth), the public entity’s establishing legislation, and other relevant legislation
• accountability attaching to your role – eg for decisions made
• the level and type of indemnities and insurance available to protect a Board member who may be sued as a result of work on the Board
• information explaining the required attendance and time commitment
• your duties and responsibilities
• information on any reimbursement of expenses or remuneration
• details of pre-appointment checks, including probity checks and declarations of private interests

Potential Board members

If I become a Board member will I be paid?

Service on some Boards is voluntary while on others it is customary for payment to be made to Board members for the time they spend at meetings. You can expect any payment to be relatively modest. There is an element of public duty involved in serving on a Board.

Potential Board members

I have been told I am under consideration for appointment to a Board of a public entity. Can I expect the work to be onerous?

The commitment required of a Board member is considerable. Board members must have sufficient commitment to the Board’s work to attend all meetings unless they have leave of absence. Board members should receive the meeting papers some days in advance of the meeting so that they can read and absorb them in time for the meeting. You will be under a duty to exercise care, skill and diligence as a Board member and to act in a financially responsible fashion.

Directors' Code of Conduct and Guidance notes

Do Board members have insurance coverage?

Boards are usually able to obtain indemnity insurance (Director's and Officer's Insurance) to protect members in their Board work providing they are acting in good faith and have not been negligent. The Board should ensure that Board members are fully briefed on the options that may be open to the Board and ensure the public entity takes out appropriate insurance where this is appropriate.

Members' liabilities, indemnity and insurance

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Who is responsible for Board appointments?

Ministers are responsible for the majority of Board appointments to public entities within their portfolios, subject to legislative or Cabinet requirements applying to individual appointments.

Selection and appointments to the Board

What should an induction program include?

An induction program should be run for one or more members and include:

• a formal meeting with the Chair to discuss any queries the member has
• a formal meeting with the CEO and relevant staff to learn about operational issues
• provision of an induction package

New members welcome and induction

Will I have to do any sub-committee work or attend functions?

You will almost certainly have to serve on a committee. Attending any corporate functions is also an important part of being on the Board of a public entity.

Board committees

Do I have to declare my personal interests?

Boards are required to maintain a register of interests. Declarations of private interests must be completed by candidates for appointment to the Board. These declarations may be used as the initial basis for a register of interests. Every Board member is required to review and update their declaration of interest as their circumstances change, but at least once annually.

Managing conflicts of interest and duty

Is all Board information confidential? What will happen if I divulge confidential information?

Check the enabling legislation. Ask the Chair for clarification on what information is confidential and what penalties apply for breaching confidentiality. Ask for written notice of any information that is deemed confidential. If there is doubt, the safest thing to do is to assume it is confidential.

What are my primary responsibilities as a Board member?

A Board member’s primary responsibility as a Board member is to act in the best interests of the public entity. A Board member is in a position of trust. The member’s actions can have a deleterious effect on the public entity and its stakeholders. That is why the courts and Parliament have imposed a number of strict duties on Board members. Prime among these is the duty to subordinate the member’s own interests to those of the public entity. It is a breach of that responsibility for a member to use their Board position to secure a personal benefit, such as using information derived from work for the Board to make a profitable investment.

Directors' Code of Conduct and Guidance notes

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Do I have a duty to comply with establishing legislation or other documents?

Yes. A member must exercise their powers for the purposes set out in the Act, or other documents that established the public entity. A member must be satisfied that the Board is acting "within power".

Directors' Code of Conduct and Guidance notes

What may happen if we make a "bad" decision?

This is a complex question. In cases of illegal or improper conduct a Board and its members may face legal action under the Board's establishing legislation, Criminal Law or Common Law. Ask the Chair and Executive Officer about your statutory obligations and potential liabilities. Always act honestly and in good faith, be diligent and ethical, and be prepared to challenge "bad" decisions. A Board member may run a risk of being held personally liable for losses if he or she contributed to them by not acting reasonably competently and with attention to the objectives of the public entity.

Directors' Code of Conduct and Guidance notes

What is the difference between the Chair of the Board and the CEO of the public entity?

The Chair is responsible under the Public Administration Act 2004 for ensuring that relevant policies are brought to the attention of members of the Board and that the Board performs in such areas as adherence to its objectives, risk management, accountability to the responsible Minister, performance assessment of members, adherence to a code of conduct for members, conflicts of interest, gifts policy and financial accountability. More generally the Chair has responsibilities to provide leadership and relationships management to the public entity and the Board.

The CEO, on the other hand, is responsible under the Financial Management Act 1994 for appointing a Chief Finance and Accounting Officer, the public entity’s accounts, presentation and provision of the public entity’s financial information, and for debt recovery and write off of debts. More generally the CEO is responsible for the day to day management of the public entity in accordance with the law, with the decisions of the Board and with Government policies.

Roles: the Chair
Roles: the Chief Executive Officer

Can the Minister give directions to the Board?

Ministers may issue directions affecting their Departments and portfolio public entities because of their responsibility for their good governance and proper operations. Ministers may also issue some directions in accordance with various Acts of Parliament.

The Board must ensure that arrangements are in place to consider and monitor implementation of Ministerial directions.

Complying with Ministerial Directions

What is a conflict of interest?

A conflict of interest is a real, perceived or potential conflict between the personal or business interests of a member and the member’s duty to act in the interests of the public entity.

Sometimes Board members may find that their personal, family or financial interests make it difficult to perform Board duties impartially in the public interest. The decisions of the Board may also be tainted if there is a reasonable perception that members, their family or close associates could benefit personally from decisions of the Board.

Managing conflicts of interest and duty

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What is conflict of duty?

This is a conflict between the duty a member has to the public entity and a duty they have to another entity.

For example, the member may be a member of the Board of a private sector entity that is in financial difficulty, while at the same time being a member of a Board of a public entity proposing to enter a major long-term contract with the private sector entity.

Managing conflicts of interest and duty

What does the Public Administration Act 2004 require where there is a conflict of interest?

Under s. 81 of the Public Administration Act 2004 (PDF 568KB) a public entity governed by Division 2 of Part 5 of the Public Administration Act 2004 (PDF 568KB) must implement a process for financial and non-financial interests as follows:

Under s. 81 of the Public Administration Act 2004 a public entity governed by Division 2 of Part 5 of the Public Administration Act 2004 must implement a process for financial and non-financial interests as follows:
The Chair must:

• ask for full disclosure of interests at the beginning of meetings of the Board
• record the disclosure in the minutes of the meeting
• ask the Board to decide whether the conflict is material or "real"
• enable the Board to ask the member to leave the room while the matter is considered
• prohibit the member from taking part in any Board decision on the matter

Also, the Board must notify the responsible Minister in writing as soon as practicable after becoming aware of any breach of this process

This is a best practice approach and all Boards should consider adopting it even if they are not governed by Division 2 of Part 5 of the PAA.

Managing conflicts of interest and duty

What if my duty to the Board conflicts with my duty as a representative of an organisation or community sector?

If there is a conflict between your duties as a Board member and your duty as an employee or member of another organisation, then your duty to the Board must take precedence. You may abstain from voting on the relevant issue and have your reason for abstaining noted in the minutes.

Managing conflicts of interest and duty

Someone has told me of suspected improper conduct by a member of the Board or staff member – what should I do?

You should follow the public entity's procedures for whistleblowing.

Whistleblowers Protection Act 2001

Where do I go for more information about whistleblowing?

Victorian Legislation
Victorian Ombudsman

Whistleblowers Protection Act 2001

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