The GBE Director – Role
Leadership and strategic direction
Directors have a pivotal role in providing GBE leadership and governance in the context of the operating framework for GBEs and developing business strategies.
Directors should seek the attainment of government policy objectives while promoting proper accountability for public assets and ensuring sound financial management.
Directors are obliged to minimise any divergence of interests between the GBE and its shareholders and the policy and governance expectations of Shareholder Ministers.
(RMG-126 paragraph 1.7)
Directors are responsible for the stewardship of public assets and the ongoing solvency of a GBE.
In the case of Commonwealth Companies, Directors bear personal responsibility for insolvent trading liabilities under Part 5.7B of the Corporations Act.
Directors have an important role in monitoring the delegation of powers to the Chief Executive Officer (CEO) and/or Managing Director (MD) and the senior executives. There are a number of important elements to this role:
- assessing the current performance of the GBE against the agreed performance measures set out in the latest Corporate Plan
- ensuring a rigorous and effective risk management system is in place, with appropriate reporting lines and internal controls and
- considering the longer-term financial and organisational sustainability of the GBE, which includes having regard to the organisational culture and behaviours.
Directors have specific obligations to establish and maintain systems relating to risk and control.
The Commonwealth has outlined its expectations as to how Corporate Commonwealth Entities will engage with risk in Implementing the Commonwealth Risk Management Policy – Guidance (RMG-211).
GBE risk management frameworks should be aligned with Implementing the Commonwealth Risk Management Policy – Guidance as a matter of good practice.
Consistent with standard commercial practice, Directors may delegate some of their powers to the CEO/MD, who will be charged with the day-to-day operation of the GBE.
Directors will be called on to directly authorise those transactions that fall outside of the delegation to GBE management, which are likely to be the largest and most strategically important transactions.
The GBE Director – GBE general duties (fiduciary)
The Corporations Act governs the fiduciary duties of Directors in Commonwealth Companies. The core fiduciary duties applying to Directors of Corporate Commonwealth Entities under the PGPA Act are based on the fiduciary duties set out in the Corporations Act and include additional requirements relating to the Commonwealth and other persons.
Duty of care and diligence
A Director must exercise his or her powers, perform his or her functions and discharge his or her duties with the degree of care and due diligence that a reasonable person would exercise if they were a Director of a GBE in the GBE's circumstances and held the position and had the same responsibilities in the GBE as the Director in question.
Duty to act honestly, in good faith and for a proper purpose
A Director must exercise his or her powers, perform his or her functions and discharge his or her duties honestly, in good faith and for a proper purpose. This duty largely aligns with the corresponding duty under the Corporations Act.
Duty in relation to use of position
A Director must not improperly use his or her position to gain a benefit or advantage for himself or herself or any other person, or to cause detriment to the GBE, the Commonwealth or other person.
This duty largely aligns with the corresponding duty under the Corporations Act, except that the duty requires Directors to prevent causing detriment to not only the GBE, but also to the Commonwealth and other persons.
Duty in relation to use of information
A Director must not improperly use information to gain a benefit or an advantage for himself or herself or any other person, or cause detriment to the GBE, the Commonwealth or any other person.
Duty to disclose interests
A Director who has a material personal interest that relates to the affairs of the GBE must disclose details of the interest. The concept of materiality is anything that has the capacity to impact on the ability of the Director to honestly discharge their duties to the GBE.
Interaction with Corporations Act, other legislation and common law
The PGPA Act does not displace other Commonwealth legislation or the principles or rules of common law or equity.
Directors must still have regard to their duties and obligations under the GBE's enabling legislation (if any) and the Corporations Act (if applicable).
The GBE Director – GBE specific duties (strategy, governance and oversight)
A key responsibility of Directors is to effect proper oversight of a GBE. This obligation resembles the obligation of a Director of a private company, with an overlay of stewardship of public assets which is distinctive to Commonwealth entities and companies.
In exercising their powers in compliance with their fiduciary obligations, Directors should look at the underlying intent of the guidance and minimum requirements provided and not just technical compliance.
Duty to govern entity
The Directors of a Corporate Commonwealth Entity have an additional layer of responsibility in relation to the management of the GBE, being the fundamental duty to govern the GBE in a way that promotes the proper use and management of public resources, the achievement of its purpose and the financial sustainability of the entity. 'Proper' in this context means efficient, effective, economical and ethical.
The Board as a whole will therefore need to exercise its decision-making powers and oversight of management in ways that discharge this duty.
(PGPA Act s15 and RMG-200)
Duty to establish and maintain systems relating to risk control
The Directors of a Corporate Commonwealth Entity must ensure that the entity establishes and maintains an appropriate system of risk oversight and management and an appropriate system of internal controls. At a minimum, the entity must have policies and processes for identifying, measuring, managing and reporting material risks. The internal controls implemented will need to be commensurate with the level of risks applicable to the GBE.
Corporate Commonwealth Entities are encouraged, as a matter of good practice, to apply the Commonwealth Risk Management Policy published by Finance in relation to risk management frameworks and systems.
(PGPA Act s16 and Implementing the Commonwealth Risk Management Policy – Guidance 2016)
Duty in relation to requirements imposed on others
Directors are required to ensure that, when imposing requirements on others in relation to the use or management of public resources for which the GBE is the responsible entity, they take account of risks associated with that use or management and the effects of imposing the requirements.
The duty seeks to ensure that any administrative, compliance or reporting requirements imposed on others is commensurate with the risks associated with the use or management of the public resources by the person, essentially to prevent excessive 'red tape'.
(PGPA Act s18, RMG-200)
Duty to keep Shareholder Ministers informed
The Directors have an obligation to keep the Shareholder Ministers informed of the operations of a GBE in order that Shareholder Ministers may comply with their own obligations.
(PGPA Act s19 and s91 and RMG-126 paragraph 3.25)