Boards have rights. A right to information, a right to question management, a right to dictate the quality of the information, how it is presented and the analysis expected. A right to seek external professional advice and a right to ensure the organisation they govern has the right people with the right skills. Importantly, boards have these rights in order to make decisions – not just any decisions, defensible decisions. However, there is one right boards consistently forget – that is the right to say no.
In discussing how the banking royal commission has forced boardrooms across Australia to rethink how they challenge management and keep tabs on corporate culture, Citibank Australia chair Sam Mostyn said (The Australian, 23 November 2018, p. 21) that on almost every issue that had been prosecuted in the royal commission, there was a focus on what a board knew, how it challenged management and how it investigated issues. Ms Mostyn, also a director of Mirvac, Transurban and Virgin Australia, said that each board she was on had been through the process of looking at the financial regulator’s review of CBA and what it said about the behaviour of the board and senior management. Questioning management and clearly articulating the board’s expectations is critical. Having the desired level of assurance that robust processes, procedures and controls are in place to enable the board to make defensible decisions is critical. Ms Mostyn makes important observations, particularly in terms of boards testing themselves and assessing performance.
“All the boards I am on have tested ourselves, with the help of some of our external suppliers, to see how we fit against that criteria that the CBA was judged, and it has meant changes,” she said.
Effective Governance is one of those external suppliers and as the pre-eminent governance and corporate culture advisors in Australia, we have the expertise and demonstrated achievements across Australia to provide the solutions for boards to excel. In fact, we have developed Australia’s first Corporate Culture and People Risk Diagnostic specifically designed to assist boards to review culture and the underlying risks inherent in human behaviour when operating outside of desired cultural norms. The diagnostic allows boards to implement a more robust governance framework that not only provides oversight for financial, regulatory and strategic risks, but also monitors the sometimes (when we are not looking) less visible risks within people and social systems.
Effective Governance sees its role as providing advice and support to boards in order to develop a robust governance framework based on an agreed culture of compliance with the law and alignment with values.