Independent school boards – will you pass the test?

• Stephen Howell
• Effective Governance News
• 10 Comments

Boards charged with governing in the complex and competitive environment of the independent school sector are constantly challenged in understanding the regulatory, technical and economic issues facing their school. Are you confident that:

• Your board has the right directors with the right skills;

• Your board is providing the strategic direction and oversight to your school necessary to achieve organisational performance;

• Your board is ready to comply with a new regulatory regime; and

• Your board is in the best position to pass these and continuing tests.

Independent schools are significant businesses, established and governed independently on an individual school basis or as part of a system, providing one of the most important services to young people in Australia. School governing bodies, known variously as boards, councils or committees, are the key decision-making bodies for most independent schools and are responsible for issues such as a school’s educational provision, current and future development and staffing. As such, it is imperative the principals or CEOs and senior executives charged with managing schools are provided with the requisite strategic direction and guidance from the board to ensure high performance and ultimately the best results for students. Therefore, being an effective member of a school board is a challenge and requires a range of particular skills, knowledge and experience.

In meeting this challenge, particularly in an environment of heightened scrutiny of directors, it is important that all boards, including independent school boards strive to achieve high performance through leading practice governance processes and procedures. Assisting directors in their important task is Australia’s framework of regulatory and prudential oversight of boards, directors and organisations, which is next to none and provides for the level of scrutiny and accountability demanded by stakeholders. Commentators erroneously suggest the regulatory and compliance burden is becoming onerous. This is far from the case as we know high performing boards equate to high performing organisations and results.

We also know that demonstrated leading practice governance and skilled and talented boards ensure favourable acceptance from stakeholders. As highlighted by the Organisation for Economic Co-operation and Development (OECD) the presence of an effective ‘corporate’ governance system, within individual companies and across an economy as a whole, assists in providing the confidence necessary for the proper functioning of a market economy (OECD, 2004). As a result, the cost of capital is reduced and organisations are encouraged to become more efficient in the use of resources. Therefore, good corporate governance and better financial performance may form a virtuous circle where improvement in one facilitates the improvement in the other.

With the establishment of the charity and not-for-profit sector’s own regulator, the Australian Charities and Not-for-profit Commission (ACNC), directors require a heightened understanding of the regulatory regime in which they operate and a clear understanding of their duties and governance requirements to ensure compliance with their role to set the strategic direction, oversee performance and manage strategic risk. As such, independent schools are looking for high performing boards to provide for the future of the sector.

Although the ACNC has described itself as a ‘benign regulator’, the recent introduction of the five governance standards should not be taken lightly. Most independent schools will identify as a charity, in one form or another, and with the focus of the ACNC primarily on the charity sector, boards of independent schools need to clearly understand the governance standards, their roles and responsibilities to ensure they are governing in the best interest of their school. Standards one, two and three (ensuring the entity acts in furtherance of its charitable status, being accountable to members and compliance with Australian laws) will not impose any additional burden. However, standards four and five, suitability and duties of ‘responsible entities’ (i.e. board members), will require risk assessment, mitigation and the introduction of process and procedure to ensure compliance.

Hard evidence, survey data, comments from independent school board members and anecdotal information suggests that boards of independent schools in Australia identify the professional development of directors, in their significant governing role, as crucial. There is no question the skills and experience of directors is critical to the growth, health and innovative spirit of the sector and for education provision as a whole.

In response to these needs, an exciting new initiative is the introduction of the Independent Schools Governance Program by Independent Schools Queensland (ISQ). Effective Governance is pleased to be part of this program, assisting ISQ in its development and delivery. The program is a flagship program developed specifically for an independent school setting where it will provide relevant, timely and enjoyable professional development to individuals of governing bodies and senior executive teams of independent schools in Queensland.

The program structure of twelve key modules comprising: defining governance roles; legal environment and directors duties; decision making supported by board processes; financial governance (two modules); compliance and policy framework; strategy and performance measures; risk framework; stakeholder engagement and networking; CEO/Principal governance and executive oversight; board effectiveness and boardroom dynamics is offered through four short courses. Each short course builds on the knowledge and experience of previous courses. Modules are facilitated through engaging two-hour workshops, with small groups of no more than 12, to encourage sharing of experiences and interactions between more seasoned directors and those new to the role.

Independent school board members know only too well that taking a seat on a governing body requires more than just agreeing to show up at a certain time and place for meetings. For example, board members need to know just what is meant by ‘governance’ as well as their roles and responsibilities. The issue of ‘governance’ is one that every organisation must consider in the context of its own unique operating environment. There was a time for many organisations when governance was seen as being full of good intentions, but of little practical application and boards were in place because the law said they had to be. However, governments and courts, not to mention the demands of stakeholders as previously mentioned, have ensured that this is no longer the case. Boards are now expected to play a leadership role while recognising ‘governance’ leadership is distinct from ‘management’ leadership; the board leads, it does not manage the organisation on a day-to-day basis.

Thus, corporate governance fundamentally relates to:

• The process of setting, guiding and monitoring the organisation’s future direction;
• Ensuring the organisation operates within its relevant legal and other boundaries;
• Driving organisational performance (through the management team appointed by the governing body); and
• Establishing appropriate internal control processes and accountability systems.

According to the OECD Directorate for Education (2005), effective school boards can contribute greatly to the success of their schools:

• By contributing to a well-run school, boards can improve the environment of learning and teaching and lead to better student outcomes.
• The school board’s most important decision may be selecting the school principal, an appointment which is crucial to effective pedagogical leadership of the school
• School boards also strengthen effective governance, promote democratic participation and establish relationships between schools and the community.

As with corporate governance in other sectors, governance for schools is concerned with the systems and processes that ensure the overall direction, effectiveness, supervision and accountability of the school. Board members take ultimate responsibility for the governance of the school. Further, for school boards, governance relates to the way the board works with the principal and staff, the school community, service providers and other stakeholders to ensure the school operates within the law, and within and for the purposes established by its constitution.

Finally, independent school governing bodies are given considerable power under a constitution, providing responsibility for the school’s strategic direction, academic and general reputation, financial viability and the maintenance of high standards of conduct and probity. As such, board members must be diligent in fulfilling their duties and have an obligation to ensure they are able to meet any test relating to those duties.

References

OECD Directorate for Education. 2005. School boards – school councils: Pointers for policy development. Available: www.oecd.org/edu/school/45162909.pdf.

Organisation for Economic Co-Operation and Development (OECD). 2004. OECD Principles of Corporate Governance. Paris: OECD Publications Service.