Home >> Publications >> Governance Arrangements for Commonwealth Government Business Enterprises

Governance Arrangements for Commonwealth Government Business Enterprises

Published January June 1997

Full Publication

Governance Arrangements for Commonwealth Government Business Enterprises - June 1997 PDF version [ 89 KB]

Table of Contents

• Part 1 - Overview
  • Principles
  • Application
  • Mandate and Objectives
• Part 2 - Reporting
  • Corporate Plans
  • Statements of Corporate Intent
  • Progress Reports
  • Reports on Operations and Financial Statements
  • Keeping Shareholder Ministers Informed
• Part 3 - Boards of Directors
  • Board Responsibility
  • Board Appointments and Removal
• Part 4 - Financial Governance
  • Capital Structure and Dividend Policy
  • Managing Risks
  • Financial Targets for GBEs
  • GBE Borrowings
• Part 5 - Other Governance Matters
  • Workplace Relations
  • Superannuation
  • Partly Owned GBEs, Partly Owned Subsidiaries of GBEs and Joint Ventures Involving GBEs
  • Arrangements for GBEs Being Sold or Restructured
• Attachment A: Matters for Inclusion in the Statement of Corporate Governance
• Attachment B: Best practice timetable for GBE reports and dividend

Part 1 - Overview

Principles

1.1 The Commonwealth's relationship to its GBEs is similar to the relationship between a holding company and its subsidiaries, features of which include:

1. a strong interest in the performance and financial returns of the GBE;
2. reporting and accountability arrangements that facilitate active oversight by the shareholder; and
3. action by the shareholder in relation to the strategic direction of its GBEs where it prefers a different direction from the one proposed.

1.2 The Commonwealth's ownership interest is represented by two `Shareholder Ministers', the portfolio Minister (that is the Minister responsible for the portfolio in which the GBE is located) and the Finance Minister.

1. All correspondence, reports, etc from GBEs should be sent to both Shareholder Ministers simultaneously. Whilst Shareholder Ministers will consult in relation to all correspondence, they may decide that, in relation to some matters, one of the Shareholder Ministers will correspond on behalf of both Ministers.
2. The Shareholder Ministers may provide copies of corporate plans, progress reports and correspondence on other major matters to the Prime Minister and/or the Treasurer for possible comment.

1.3 The guiding principles of the governance arrangements are:

1. Shareholder Ministers exercise strategic control consistent with their accountability to the Parliament and the public.
2. Shareholder Ministers set clear objectives for GBEs;
   1. any Community Service Obligations (CSOs) that a GBE is to undertake are generally specified through contractual arrangements.
      
3. The directors of a GBE develop the business strategies and handle the day-to-day management policies.
4. The directors of a GBE ensure that:
   1. the GBE's activities are conducted so as to minimise any divergence of interests between the GBE and the shareholders;
   2. GBEs are managed in the best interests of the shareholders; and
   3. GBEs and their officers maintain the highest standards of integrity,  accountability and responsibility.
5. Required standards of disclosure are satisfied. In particular, timely  disclosure is to be made by GBEs of information:
   1. which may affect the shareholder value of the organisation;
   2. which may influence Government decisions in relation to the GBE; or
   3. in which the Government has a legitimate interest.
6. Information is produced for the shareholder and the community according to the highest standards;
   1. where appropriate, information enables ready comparison with other relevant information.
      
7. The Shareholder Ministers must be consulted on matters of significance.

• Application

  1.4 These arrangements apply to:

  1. Government Business Enterprises (GBEs) that are wholly owned by the Commonwealth; and
  2. indirectly, subsidiaries of wholly owned GBEs through the governance arrangements that the wholly owned GBE has with its subsidiaries.

  1.5 For partly owned GBEs, the extent to which the governance arrangements apply will be identified in legislation applying specifically to the GBE, and/or the GBE's memorandum and articles of association and/or shareholders agreement (see paragraphs 5.3 to 5.12 for more detail).

  Mandate and Objectives

  1.6 A principal objective for each GBE is that it adds to shareholder value. To achieve this it is required to:

  1. operate efficiently, that is, at minimum cost for a given scale and quality of outputs
  2. price efficiently
     1. A GBE should set prices taking into account economic forces, including the level of demand for, and the enterprise's capacity for and cost of supplying, individual goods and services.
     2. The Government may impose price conditions on GBEs providing goods and services in a monopolistic market or CSO goods and services. Specific arrangements, if needed, would be additional to those arising from general oversight by the Australian Competition and Consumer Commission.
  3. earn at least a commercial rate of return
     1. This means recovering the full cost of the resources employed, including the cost of capital.
     2. Each GBE is to work towards a financial target and a dividend policy, agreed in advance with the Shareholder Ministers, with the financial target to be set on the basis that each GBE should be required to earn commercial returns at least sufficient to justify the long-term retention of assets in the business, and to pay commercial dividends from those returns.1

  1.7 In addition to setting a commercial rate of return target, the Shareholder Ministers may set other financial targets and non-financial targets, for particular GBEs, on a case-by-case basis.

  1.8 A GBE should operate in the industry sector, and provide the goods and services (including CSOs), that the Government has mandated.

  1. The Government may impose service quality standards on GBEs providing goods and services in a monopolistic market or CSO goods and services.
  2. In providing each GBE with a clear mandate and set of objectives the Shareholder Ministers will ensure that the objectives include any requirements to meet explicitly stated Government social and economic objectives.

  1.9 The mandate of a GBE will be reviewed by the Government about every three years, and consideration given to the rationale for continuing Commonwealth ownership of the organisation.

  1.10 Ministerial directions to GBEs, as prescribed in enabling legislation and company constitutions, are to be in writing and tabled in both Houses of Parliament within 15 sitting days.

  1.11 An ultimate objective for each GBE is for it to operate at world best practice.

  Back to top

  Part 2 - Reporting ²

  Corporate Plans

  2.1 The directors of a wholly owned GBE must prepare a corporate plan at least once a year and give it to the Shareholder Ministers.

  1. The plan covers a period of at least 3 years.
  2. If the GBE has subsidiaries, the plan covers both the GBE and its subsidiaries. In particular, for each subsidiary the plan includes details of the matters in (d) below, so far as they are applicable.
  3. The directors keep the Shareholder Ministers informed about:
     1. significant changes to the plan; and
     2. matters that arise that might significantly affect the achievement of objectives in the plan.
  4. The plan includes details of the following matters (so far as they are applicable):
     1. the objectives of the GBE,
        • including details of the broad mandate of the GBE, and those functions that may require its retention as a Government owned organisation;
     2. assumptions about the business environment in which the GBE operates;
     3. the business strategies of the GBE;
     4. the investment and financing programs of the GBE, including:
        • strategies for managing risk; and
        • proposed borrowing;
     5. financial targets and projections for the GBE,
        • with financial projections prepared in the same format as the progress and final reports - consisting of profit and loss statement, balance sheet and cash flow statement;
     6. the dividend policy of the GBE;
     7. non-financial performance measures for the GBE;
     8. community service obligations of the GBE, including:
        • strategies and policies the GBE is to follow in carrying out those obligations; and
        • estimated costs, including strategies for minimising costs;
     9. review of performance (financial and non-financial) against previous corporate plans and targets;
     10. analysis of factors likely to affect achievement of targets or create significant financial risk for the GBE or for the Commonwealth;
     11. price control and quality control strategies for goods or services supplied by the GBE in a monopolistic market;
     12. human resource and workplace relations strategies.
  5. The plan also covers any other matters required by the Shareholder Ministers (which may include further details about the matters in (d) above).

  2.2 The Shareholder Ministers may elect to meet with the directors of a GBE prior to the Ministers responding to the corporate plan.

  2.3 The response by the Shareholder Ministers will:

  1. include (if necessary) proposed changes to the corporate plan to better reflect the Government s policies and objectives for the business; and
  2. be within 45 days of receipt of the plan.
     1. It would assist in meeting the timetable for response if drafts of the corporate plan were made available for discussion with departmental officers prior to the plan's endorsement by the Board.

  2.4 All corporate plans and subsequent updates, reports or supplementary information are confidential to the Ministers, their advisers and Departments.

  Statements of Corporate Intent

  2.5 The directors of a wholly owned GBE and the Shareholder Ministers agree on a Statement of Corporate Intent (SCI), which shall be a public document.

  2.6 The SCI is a brief (no more than five pages), high level, plain English document expressed in terms of outputs or outcomes. It is an integral part of the Corporate Plan, but does not include commercial-in-confidence information. An SCI would normally contain a business description and mission statement, corporate vision, objectives, code of ethics, statement of accountability (including reporting obligations) and broad expectations on financial and non-financial performance.

  2.7 The SCI is tabled in Parliament within fifteen sitting days of the Parliament, following the start of the new financial year.

  1. Shareholder Ministers may agree to later tabling, in which case Parliament would be informed.

  Progress Reports ³

  2.8 Confidential six monthly reports (or quarterly reports, as agreed from time-to-time by the Shareholder Ministers) are provided by the directors of a wholly owned GBE to the Shareholder Ministers on progress against, and any changes to, the corporate plan.

  1. Progress reports include financial statements, the format of which is approved by the Finance Minister.

  2.9 The Shareholder Ministers may elect to comment on the report. Any response is provided by the Ministers within 45 days of receipt of the progress report.

  2.10 All progress reports are confidential to the Ministers, their advisers and Departments.

  Reports on Operations and Financial Statements

  2.11 The directors of a GBE are required to provide an annual report, or the annual general meeting documents, to the Shareholder Ministers. The portfolio Minister tables the report or documents in each House of the Parliament.

  1. Where a GBE is a statutory authority the annual report, or the financial statements included therein, is prepared in accordance with guidance promulgated by the Finance Minister.
  2. Where a GBE is a company, the annual report is prepared in accordance with the Corporations Law.
     1. The annual report of a company GBE should include a statement of the main corporate governance practices that the GBE had in place during the reporting period, similar to that required by the Australian Stock Exchange (ASX) listing rules. An indicative list of matters that a GBE may include when making the statement is included at Attachment A.

  2.12 Financial statements of GBEs and their subsidiaries, associated with annual reports, annual general meeting documents, or interim reports, are audited, or reported on, by the Auditor-General.4

  2.13 The Auditor-General may conduct a performance audit of a wholly owned GBE, or any of its subsidiaries, in certain circumstances.

  2.14 The Finance Minister may require:

  1. the directors of a wholly owned GBE to prepare an interim report covering operations for the first six months, or for the first three, six and nine months of each financial year; and
  2. to provide it to the portfolio Minister within 2 months after the end of the period to which the report relates.

  2.15 The portfolio Minister tables the interim report in each House of Parliament.

  2.16 The Shareholder Ministers assess the financial performance of all GBEs on a regular basis and may write to a GBE about issues identified in such assessments.

  Keeping Shareholder Ministers Informed

  2.17 The directors of a wholly owned GBE should follow a disclosure principle which is similar to the continuous disclosure requirements of the Australian Stock Exchange listing rules: once a GBE comes aware of any information that may have a material effect on its value, that information must be immediately provided to the Shareholder Ministers.

  1. Wholly owned GBEs should generally avoid issuing debt securities that would bring them within the definition of "disclosing entity" under the Corporations Law. This will minimise the potential for conflict between the Commonwealth Authorities and Companies Act 1997 (CAC Act) and section 1001A(1) of the Corporations Law.

  2.18 If a wholly owned GBE, or any of its subsidiaries, proposes to participate, change or dispose of an interest in a company, significant business, significant partnership, trust, unincorporated joint venture or similar arrangement, the directors should immediately give the Shareholder Ministers written particulars of the proposal.

  1. The Shareholder Ministers may give written guidelines to the directors that are to be used by the directors in deciding whether a proposal requires consultation with the Ministers.
  2. When becoming involved in joint ventures, GBEs should generally adopt the incorporated form, or enter into the joint venture through a subsidiary.

  2.19 The directors of a wholly owned GBE are required to keep the Shareholder Ministers informed of the operations of the GBE and its subsidiaries, and to give the Ministers such information in relation to those operations as the Shareholder Ministers require, within the time limits set by the Ministers.

  Back to top

  Part 3 - Boards of Directors

  Board Responsibility

  3.1 The general conduct of directors is subject to the provisions of the Corporations Law (for company GBEs) and the CAC Act ( for statutory authority GBEs). The latter provisions are based on the Corporations Law. Both sets of provisions include penalties for misconduct.

  3.2 Boards have absolute responsibility for the performance of the GBE, and are fully accountable for this to the Shareholder Ministers.

  3.3 Board members have their fiduciary and other duties drawn to their attention by Shareholder Ministers in, or with correspondence offering appointment, and are to fully accept the individual responsibility this places on them.

  Board Appointments and Removal

  3.4 GBE Boards of directors are to comprise people with an appropriate mix of skills, who are to be appointed on the basis of their individual capacity to contribute to the Board having an appropriate balance of relevant skills (such as commerce, finance, accounting, law, marketing, workplace relations and management) and contribute to the achievement of the GBE's objectives.

  1. Boards should draw on outside expertise where necessary to augment their own skills.
  2. The Board Chairperson shall not also be an executive of the GBE, unless otherwise agreed by the Shareholder Ministers.
  3. The appointment of departmental officers to GBE Boards will only be considered in exceptional circumstances, having regard to their ability to represent the interests of the Government, their possession of the business skills referred to above, and to any potential conflicts of interest that might arise.

  3.5 The Board Chairperson shall head a Board Nomination and Remuneration Committee, which shall, through the Board, provide Shareholder Ministers with a list of suitable candidates for Board membership.

  1. Shareholder Ministers may elect to appoint a candidate not proposed by the Committee.
  2. Shareholder Ministers shall consult with the Prime Minister and the Treasurer on all Board appointments.

  3.6 The Remuneration Tribunal determines the remuneration for the directors that is compatible with their responsibilities, and having regard to, amongst other things, rates paid by the private sector.

  3.7 Board appointments should normally be for terms of three years. The Board Nomination and Remuneration Committee is free to include retiring Directors in its list of candidates.

  3.8 Shareholder Ministers may, at their discretion, remove directors prior to the completion of their term of appointment.

  1. In the event that a GBE is not performing satisfactorily, the Shareholder Ministers will initiate prompt remedial action. Dismissal of the directors would be considered, particularly in any case of failure to keep Ministers adequately informed, and in situations of ongoing under-performance in respect of financial or other aspects of the operations of the business.

  3.9 The Board should consult the Shareholder Ministers about its preferred candidate for the position of Chief Executive Officer (CEO) and provide sufficient time for the Shareholder Ministers to respond prior to an appointment being made. The CEO is directly accountable to the Board.

  Part 4 - Financial Governance

  Capital Structure and Dividend Policy

  4.1 Each GBE should have a target optimal capital structure (the combination of financial liabilities and equity used to fund the assets of the GBE) that is agreed annually between the directors and the Shareholder Ministers in the corporate plan consultation process. An optimal capital structure is one that, in light of economic, industry and firm specific factors, would provide for an investment grade credit rating, whilst at the same time imposing a discipline on the GBE to optimise efficiency.

  4.2 A GBE s level of estimated dividends (and forecast payout ratio) is to be agreed annually between the directors and the Shareholder Ministers through the corporate plan consultation process and should have regard to the maintenance of, or progress toward, its optimal capital structure.

  1. In that context, the level of estimated dividends shall be driven by the desired capital structure, the profitability of the enterprise, and the level of agreed future capital expenditure.
  2. The proposed dividend payout ratio and estimated dividend payment should be included in the corporate plan for each year covered by the plan.

  4.3 In providing for a GBE to expand its capital base through retained earnings, any proposed future capital expenditure should add shareholder value. That is, as a minimum, capital expenditure plans must meet a hurdle rate of return that is consistent with the GBE s principal financial target (as discussed under the subheading "Financial Targets for GBEs").

  4.4 The agreed dividend payout ratio should take account of the Government's preference for dividends over capital gains (a payout ratio greater than 60% of profits after tax and abnormals would reflect that preference), but the payout for each year and for each GBE should relate principally to the considerations described in paragraph 4.2 above.

  4.5 Dividends should be paid in two instalments: an interim dividend and a final dividend.

  1. Interim dividends are paid by 30 April and final dividends by 31 October.
  2. The Shareholder Ministers may agree on variations to those dates, after consultation with the directors of the GBE.

  4.6 Interim and final dividends to be paid should be agreed between the directors and the Shareholder Ministers, as soon as possible after the half yearly progress reports for the periods ending December and June have been received by the Shareholder Ministers.

  4.7 The capital structure of a GBE is to be reviewed where the application of dividend policy has not lead to, or is unlikely to lead to an optimal capital structure within a reasonable period of time.

  4.8 Dividend policy for partly owned GBEs should have regard to the above principles, the extent of Government ownership and the views of other shareholders.

  Managing Risks

  4.9 Directors are responsible for managing risks. Directors should therefore establish processes and practices within the GBE to manage all risks associated with the GBE's operations.

  4.10 Directors should keep the Shareholder Ministers informed of risk management strategies by outlining them in corporate plans and progress reports, and other reports when necessary. In addition, and unless otherwise qualified because of circumstances applying to a particular GBE, corporate plans and progress reports should contain a statement from the Board that the Board has appropriate risk management policies and practices in place and that adequate systems and expertise are being applied to achieve compliance with those policies and procedures.

  4.11 The Government, as a shareholder, is sensitive to commercial risk. In some circumstances, it may therefore choose to set limits on the activities of particular GBEs; for example on liabilities, financial exposures, use of derivative instruments, etc.

  1. In normal circumstances, a GBE should only use derivative financial instruments for the purpose of hedging exposures.
  2. Shareholder Ministers may require the Board of a GBE to provide a risk management plan, the contents to be agreed on a case-by-case basis.

  4.12 As a general rule the Government will not provide formal guarantees of GBE liabilities. Accordingly, directors should take this policy into account when making decisions which affect a GBE s operations and performance.

  1. Guarantees provided in the past continue to apply to existing borrowings until they mature, in order to protect the interests of investors.
  2. The enabling legislation of public financial enterprises currently provide for statutory guarantees of most of the obligations of those enterprises.

  Financial Targets for GBEs

  4.13 All GBEs are required to add to shareholder value in their operations with a view to at least meeting a financial target agreed by the Shareholder Ministers.

  1. Increases in shareholder value are achieved when the return on assets is increased, regardless of whether or not the target is reached. However where a GBE achieves a return which is less than its financial target, it has not achieved the minimum return acceptable to the shareholder, and the shareholder would expect the adoption of strategies aimed at achieving the target.

  4.14 Setting an appropriate financial target aims to:

  1. replicate the discipline that the threat of takeover would exert over the directors and managers of a firm owned by the private sector; and
  2. provide an environment for GBEs which is competitively neutral with the private sector.

  4.15 For GBEs that are classified as trading GBEs, the target is the weighted average cost of capital (WACC).

  1. This target requires the GBE to earn returns sufficient to cover the cost of debt and the required return on equity. WACC is used to estimate the required rate of return on total assets, taking into account the different required rates of return attached to the different components of the company's capital structure.
     1. The cost of debt is the expected rate at which the GBE is able to borrow.
     2. The required return on equity is the risk free rate plus the proportion of market risk premium appropriate to the GBE.

  4.16 For GBEs that are classified as financial GBEs, the target is a return on equity.

  1. This target is the risk free rate plus the proportion of market risk premium appropriate to the GBE.

  4.17 Any other financial targets which might be set for particular GBEs, on a case-by-case basis, should be consistent with the objective of increasing shareholder value.

  Measuring Against Targets

  4.18 Shareholder Ministers will agree with each GBE the methodology they will use as their measure for performance against the WACC, or return on equity, as appropriate. This measure will be based on shareholder value added and the change in shareholder value added year-on-year.

  4.19 The basic methodology is outlined in An Economic Framework for Assessing the Financial Performance of Government Trading Enterprises, Steering Committee on National Performance Monitoring of Government Trading Enterprises, July 1996, which draws on material provided by the Industry Commission.

  4.20 Financial targets should not be adjusted for any unfunded components of CSOs. Rather, any adjustments considered necessary should be made, notionally, to the organisation's actual revenues.

  GBE Borrowings

  4.21 Ongoing oversight of GBE borrowings is an integral part of the corporate plan and progress report processes outlined in paragraphs 2.1 to 2.10 above.

  4.22 The Government will consider supporting borrowing proposals beyond the first forward year for GBEs that have a proven track record of good performance and accountability, and which provide appropriate justification (including expected rates of return) in corporate plans to support proposed capital expenditure programs.

  4.23 GBEs will usually borrow from financial markets. Borrowing from the Commonwealth Budget requires the specific approval of the Finance Minister.

  4.24 Wholly owned GBEs should generally avoid issuing debt securities that would bring them within the definition of "disclosing entity" under the Corporations Law.

  1. This will minimise the potential for conflict between the proposed CAC Act and section 1001A(1) of the Corporations Law.

  Back to top

  Part 5 - Other Governance Matters

  Workplace Relations

  5.1 Subject to these governance arrangements, GBEs are free to manage relations with their employees consistent with the Workplace Relations Act 1996 and in accordance with the following:

  1. the Board of each GBE is required to consult with the Remuneration Tribunal in determining remuneration packages for Chief Executive Officers;
  2. the Remuneration Tribunal determines the remuneration for the directors that is compatible with their responsibilities, and having regard to, amongst other things, rates paid by the private sector; and
  3. any matters specified from time-to-time by the Minister for Industrial Relations, after consultation with the Prime Minister and the Finance Minister.

  Superannuation

  5.2 Superannuation arrangements for GBEs are covered by the Prescribed Requirements regime determined under the Superannuation Benefits (Supervisory Mechanisms) Act 1990. Under the Prescribed Requirements regime GBEs (except for those employing staff under the Public Service Act 1922) are able to establish and operate superannuation arrangements of their choice. Accountability to the Government is satisfied by GBEs submitting detailed annual reports to the Government on their superannuation arrangements.

  Partly Owned GBEs, Partly Owned Subsidiaries of GBEs and Joint Ventures involving GBEs

  Partly Owned GBEs

  5.3 Where the Commonwealth decides to move to, or adopt, partial ownership of a GBE the GBE governance arrangements should apply to the maximum extent possible, consistent with minimising the risk of a potential oppression action by minority shareholders under section 260 of the Corporations Law.

  5.4 Government approval is required of any proposal to set up a partly owned GBE, or to change Commonwealth ownership of an existing GBE from whole to partial ownership (including the introduction of employee share ownership schemes). The approval may anticipate a continuous process of a reduced share or level of Commonwealth ownership leading to transfer of the controlling interest to other parties and to eventual sale of all of the Commonwealth s interest.

  5.5 Where Cabinet decides to move to partial ownership of a GBE in which it is likely to retain a controlling interest for a period of time, the Shareholder Ministers, in consultation with the Attorney-General, should, before any shares in the GBE are sold or issued:

  1. review any enabling or other relevant legislation and the memorandum and articles of association (M&As) of the GBE, to assess the extent to which they are consistent with the GBE governance arrangements; and
  2. provide, through a shareholders' agreement with potential owners and/or changes to the enabling legislation and the M&As, for the GBE governance arrangements to apply to the maximum extent consistent with the policy objectives the Government is pursuing through its movement to partial ownership of the GBE.

  5.6 In negotiations with potential other owners of a GBE that the Commonwealth will not control, the Shareholder Ministers should aim to have the GBE governance arrangements applied to the maximum extent, having regard to the policy objectives of the Government in the circumstances.

  Partly Owned Subsidiaries of GBEs and Joint Ventures involving GBEs

  5.7 GBEs are generally free to establish partly owned subsidiaries, purchase a controlling interest in other companies or enter into joint venture arrangements; however under paragraph 2.18 of the GBE governance arrangements they are required to notify the Shareholder Ministers of significant proposals to form subsidiaries, joint ventures, etc.

  1. When becoming involved in joint ventures, GBEs should generally adopt the incorporated form or enter into the joint venture through a subsidiary.

  5.8 Where a GBE establishes a fully owned subsidiary, or purchases a 100% interest in a company (thereby creating a subsidiary), the directors of the GBE should ensure, prior to any move to partial ownership of the subsidiary, that no obstacles are present in the M&As and any shareholders agreement of the subsidiary to prevent the GBE from complying with the GBE governance arrangements for as long as the Commonwealth has a controlling interest in the subsidiary through the GBE.

  5.9 Where a GBE establishes a subsidiary with less than 100% ownership or purchases a controlling interest in a company with less than a 100% ownership, the directors of the GBE should ensure, primarily through the M&As and any shareholders' agreement of the subsidiary, that the subsidiary operates so as to enable the GBE to comply with the GBE governance arrangements to the maximum extent possible, for as long as the Commonwealth has a controlling interest in the subsidiary through the GBE, consistent with not exposing the subsidiary to any significant risk of successful oppression action by minority shareholders under section 260 of the Corporations Law.

  5.10 The above requirements relating to GBEs establishing subsidiaries do not apply to cases in which a GBE is undertaking equity investment and promotion of companies as part of its day-to-day business operations (for example, a GBE which provides financial services as its core function) provided the Shareholder Ministers have notified the GBE of the types of investments which are exempt.

  5.11 Where a GBE, or one of its subsidiaries, becomes involved in a joint venture the GBE should ensure that the reporting and control arrangements relating to the joint venture enable the GBE to satisfactorily meet its obligations under the GBE governance arrangements.

  5.12 The Shareholder Ministers, in consultation with the Attorney-General, should ensure that there are no provisions in enabling legislation, M&As, guidelines to directors or shareholders' agreements of a GBE which would prevent the GBE from complying with the requirements outlined above relating to subsidiaries and joint ventures.

  Arrangements for GBEs Being Sold or Restructured

  5.13 The governance arrangements apply in full to a wholly owned GBE during a sale or restructuring process, until the Shareholder Ministers decide on variations to facilitate the sale/restructuring process and to streamline reporting. The directors will be advised of variations.

  5.14 Where a decision has been taken to sell all or part of the Commonwealth's interest in a GBE, or where the possibilities of sale are being explored, the directors and management of the GBE are required to provide full co-operation and requested information to the Government during the period leading up to the sale.

  ---

  FOOTNOTES

  1. Details on financial targets are provided in paragraphs 4.13 to 4.17; details on dividends are provided in paragraphs 4.1 to 4.8.
  2. A best practice reporting timetable is at Attachment B.
  3. Progress reports are distinct from the interim reports to Parliament (see paragraphs 2.14 and 2.15).
  4. Interim reports are discussed in paragraphs 2.14 to 2.15.

  ---

  Attachment A

  Matters for Inclusion in the Statement of Corporate Governance

  The following is an indicative list of matters that a GBE may include when making the corporate governance statement required under paragraph 2.11 of these arrangements:

  1. whether individual directors, including the Chair, are executive or non-executive directors;
  2. the names and positions in relation to the GBE of the members of the Board Nomination and Remuneration Committee;
  3. the main procedures for establishing and reviewing the compensation arrangements for the directors of the GBE;
  4. the main procedures by which the Board, or members of it, can seek independent professional advice, at the GBEs expense, in carrying out their duties;
  5. the Board's approach to identifying areas of significant business risk, and to putting arrangements in place to manage them; and
  6. the GBE's policy on the establishment and maintenance of appropriate ethical standards.

  ---

  Attachment B

  Best Practice Timetable for GBE Reports and Dividends 5

  Date	Item	Comment
  by 31 July	Final corporate plan	Submitted to Shareholder Ministers.
  	Final statement of corporate intent	Signed by Shareholder Ministers and the Chairman of the Board.
  by 31 August	Progress report June quarterly or half yearly report	Submitted to Shareholder Ministers. Quarterly reports submitted on an exceptions basis.
  by 30 September	Annual report	Forwarded to Shareholder Ministers for tabling in Parliament.
  by 31 October	Final dividend paid
  by 11 November	Progress report September quarterly report	Submitted to Shareholder Ministers on an exceptions basis.
  by 11 February	Progress report December quarterly or half yearly report	Submitted to Shareholder Ministers. Quarterly reports submitted on an exceptions basis.
  by 30 April	Interim dividend paid
  by 12 May	Progress report March quarterly report	Submitted to Shareholder Ministers on an exceptions basis.
  by 31 May	Corporate plan	Submitted to Shareholder Ministers for comment. Shareholder Ministers to respond by 15 July.
  	Statement of corporate intent	Submitted to Shareholder Ministers for comment. Shareholder Ministers to respond by 15 July.

  ---

  ATTACHMENT FOOTNOTE

  5. Variations to time may be agreed between the Shareholder Ministers and the directors, on a case-by-case basis.

Copyright Notice

© Commonwealth of Australia 1997
This work is copyright. You may download, display, print and reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. Requests and inquiries concerning reproduction and rights should be addressed to Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca []

Contact for information on this page: GBE contact

Back to top