The board’s policy framework allows for the proper operations of the company, consistent with its members or shareholders’ best interests and the requirements of the law.
Policy regulates, directs and controls actions and conduct. Policies can range from broad philosophies to specific rules. Every policy decision made by the board should be designed to help the organisation realise its purpose and help it to operate more effectively.
Governance arrangements for most organisations will emphasise the role of the board in developing, monitoring and reviewing policies, but the board is only meant to do this at the governance level, since involvement in the entire policy framework of the company could become a burden for the board. The governance policy framework is the highest level of policy in an organisation and sets the rules for the operations and procedures of the board, management and employees. Further, many governance policies serve to cover legal and legislative and regulatory requirements and will also provide a framework for a culture of compliance within the organisation.
However, the board must ensure there are appropriate operational policies in place, although it does not need to develop or even review those policies. Policies and procedures dealing with operational matters are generally delegated to the CEO, although the board can reserve the right to approve some operational policies relating to the organisation such as staffing policies and financial policies to ensure these policies are consistent with the overall strategic direction, organisational values and the broader policies of the board.
Features of a good policy
A good organisational policy should:
- focus on a single topic;
- be based on a clear statement of purpose that either arises from the goals in the strategic plan or clearly supports those goals and the underlying values of the organisation;
- be compatible with relevant legislation (e.g. work health and safety; antidiscrimination);
- acknowledge and take account of the rights of stakeholders and whether consultation with those affected by the policy is required;
- contain guidelines for how the stated purpose will be achieved;
- indicate what is expected of those subject to the policy;
- be written in a style that can be readily understood by users;
- outline how it will be monitored;
- feature a date for review and who will lead the review.
Policy development should be tailored to respond to the organisational culture, operational requirements and available human and financial resources. When developing a policy, its purpose must be determined and clarified, defining the issue or requirement that needs to be addressed. The policy and accompanying documents will necessarily provide instruction to directors and employees as to what standard is expected when carrying out operations under the policy. A policy should be a ‘living’ document that is subject to regular review and, where necessary, change.
There are many reasons why policies will need to be updated or why new policies may need to be developed. Effective policies need to be regularly reviewed to ensure they reflect current information and requirements, particularly in relation to health, safety, and regulatory requirements.
As such, we recommend organisations have their own ‘policy on policies’ to set a broad framework for the development of policy and related procedures within the organisation and to set out principles for consistency in the development, approval, implementation, monitoring and review of policies, related procedures and associated documents.
To improve your policy framework, Effective Governance can:
- Review the organisation’s existing policy framework to develop an understanding of the organisation’s unique policy environment;
- Develop a comprehensive list of governance policies that should be approved by the board;
- Conduct a gap analysis to determine if there are any governance policies (i.e. board approved) missing from the current policy framework or any policies that require amendments or redrafting;
- Draft a policy on policies and associated procedures document to guide future policy development; and
- Draft missing policies and amending any existing policies identified in the documentation review.
Examples of key governance policy documents your board may need to review or develop include:
- Board charter – a policy document that clearly defines the roles, responsibilities, authorities and processes of the board and senior management
- Board induction policy and program – essential to ensuring that new directors become productive contributors to the board as quickly as possible
- Board paper policy and procedure – a policy designed to guide management in writing board papers that deliver what the board needs to know
- Code of conduct – describes the standards of conduct expected of directors, employees and contractors
- Committee charters – a policy document that clearly defines the scope of each committee
- Conflicts of interest policy – a policy designed to ensure that actual, potential and perceived conflicts of interest are identified and managed effectively
- Risk management policy and framework – good governance requires the board to establish a comprehensive system of risk management, risk oversight, compliance and internal control for the organisation
- Whistleblowing policy – a policy designed to meet compliance and/or regulatory requirements