GovernWith Blog

GovernWith blog for Boards, Directors and Executives who want to develop their governance capabilities so they achive their strategic goals and mitigate risk

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Fi Mercer

Are you assured of your Board Subcommittee's Effectiveness?

Why are contemporary Board Subcommittees so important?  

For many Boards, Subcommittees are where the bulk of the Board’s work actually takes place. Subcommittees enable a Board to ‘divide and conquer’ by distributing the detailed planning and oversight of each of the Board’s many responsibilities, across smaller groups of appropriately skilled members. While the collective responsibility for decision-making remains with the full Board, Subcommittees inform the Board through reporting and making recommendations in line with their remit.  

The number and type of Subcommittees depend on the tasks required, and their tenure may be short or long-term. Subcommittees must utilise the specific expertise of members, as well as others, including staff and/or external parties. Chairing Subcommittees provides valuable experience for members, which can be useful in succession planning for future Board leadership roles.  

Effective Subcommittees provide significant benefits to Boards, and the organisations they govern, through enabling the Board to make informed decisions and meet their many, varied governance and regulatory responsibilities. They play a key role in supporting Directors to be assured in their strategic and oversight roles for risk and compliance by providing analytical information that improves and optimises future governance decisions and performance.  

They also benefit members by providing them with the opportunity to utilise and extend their knowledge and understanding of specific aspects of governance as well as the organisation they are governing. Governance experts even advise that an accurate correlation for strong Board culture and performance is the effectiveness of a Board’s Subcommittees.  

Why the GovernWith Contemporary Governance Model for Subcommittees  

At GovernWith we understand it is essential to have contemporary Subcommittees to support our Boards and Executives ever changing and growing governance requirements.  

They play a key role in supporting Directors to be assured in their strategic and oversight roles for risk and compliance, by providing analytical and qualitative information that improves and optimises future governance decisions and performance.  

Subcommittee Plus Program:  

The types of Subcommittees covered in the GovernWith Subcommittee Plus Program are:  

  • Audit and Risk  
  • Finance 
  • Quality and Clinical Governance  
  • Remuneration and Nominations (may be called Governance) 
  • Community and Consumer Advisory Committee 

What do the Subcommittee Plus Programs Questionnaires Cover? 

Please see the following components of a Subcommittee's key functions that are covered in the questionnaires:  

  1. Subcommittee Purpose

GovernWith understands the importance of a Subcommittee's purpose stating clearly, from a high-level overview perspective in relation to a targeted area of Corporate and Sector Specific Governance roles and responsibilities.  

  1. Subcommittee Objectives (Roles & Responsibilities)

GovernWith understands that the Committee Objectives (Roles and Responsibilities, Instructions) must comply with its specific Government, Legislative, Risk, Quality, Safety, Corporate, ESG and Contemporary Governance requirements therefore this part of the questionnaire reflects each individual Subcommittees specific requirements.  

For example: If the Subcommittee being reviewed was a Finance and Audit Committee in the Health Sector the questions would reflect the functions of this committee that are determined by and must comply with:    

  • The Standing Directions 2018 (Under Financial Management Act 1994), and  
  • The Health Services Act 1988 which requires public hospitals under Section 33(2) (j) - to establish the following committees— (i) a Finance Committee, an Audit Committee and a Quality and Safety Committee  
  • Other relevant legislation and frameworks  

The questionnaires would also reflect GovernWith's Corporate, ESG, Contemporary and Leadership and Learning Styles Governance requirements based on 12 years of GovernWith Governance Data Insights.  

  1. Subcommittee Membership

GovernWith understands that to achieve its objectives, the Subcommittee Membership, both internal and external, must have the right capabilities through contextual skills, qualifications and experience relating to the specific Government, Legislative, Risk, Quality Safety, Corporate, Contemporary, ESG, Leadership and Learning Styles Governance requirements.  

This part of the questionnaire reflects the governance skills and attributes required relevant to the specific Sector.  

  1. GovernWith also has key questions in the Subcommittee Review about the following areas in the context of the type of Organisation, Subcommittee and its Corporate, Sector specific, ESG, Contemporary, Leadership and Learning Styles Governance requirements, in relation to but not limited to: 
  • Subcommittee Authority 
  • Subcommittee Chair Role, Membership Responsibilities and Capabilities  
  • Subcommittee Meeting process  
  • Subcommittee Reporting process to the Board 
  • Term of Appointment 
  • Remuneration (if required) 
  • Evaluation of Committee Performance and evaluation of Terms of Reference 

A contemporary contextual Terms of Reference is no longer enough to have a high functioning Subcommittee. GovernWith recognise and support that it’s also important to have a membership that functions well through being well led, having relevant skills, experience, qualifications and behaviours, are diligent, inclusive and have enquiring minds and are happy to ask respectful challenging questions.  
 
The Subcommittee Plus Program and subsequent next steps will support governing bodies to be confident that the Subcommittee structure is contemporary, effective and efficient, that there is transparency of information and accountability of actions to inform good decision making and governance.  

Contemporary Governance 

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Choose the board evaluation that is best for you

Choose the board evaluation that is best for you

The imperative is clear – the question is no longer WILL your board evaluate, but HOW will you evaluate. 

Recent Royal Commissions in banking, education and other institutions have led ASX to revise their Corporate Governance Principles to recommend board and director evaluation and development take place annually across all sectors to support good governance. 

But which evaluation method is best suited to your needs? 

A quick google search will return a multitude of methods by which an organisation may evaluate its board and director performance. Governance Evaluator takes a look at the pros and cons of the most popular evaluation options to help you make an informed decision for your organisation. 

1. Free surveys & tools 

Many organisations with very early governance maturity, or with very limited resources, may choose to ‘dip their toe’ into evaluation via an internally sourced and managed survey. Resource hubs such as VCOSS and  ourcommunity.com.au offer free of charge quizzes and fact sheets that give boards a good initial overview of their level of functioning. 

Pros: Suits the smallest budget. Provides a general overview of collective governance performance. Fact sheets may provide information about areas for development. Tackles the initial issue of ‘not knowing what you don’t know’. 

Cons: Content of questions and resources generic and basic, not tailored for specific industries or addressing specific issues. Can be cumbersome to complete and report upon. Lacks an external perspective. Can be time consuming to compile responses and turn into useful data for decisions about future actions. Provides no ongoing trending or benchmarking. 

2. Internal forums 

Similarly, boards at an early level of governance maturity may decide to hold a board discussion where a group consensus is sought in relation to the board’s performance on key governance requirements. At this or a subsequent session, the board would agree on actions to address issues raised. 

Pros: Can be completed in a short period of time. Does not require additional investment other than time. Helps the board go from not knowing what they don’t know, to identifying as a team what the issues are; ie ‘knowing what they don’t know’. 

Cons: Discussion & actions can be skewed by more influential participants. Lacks an external perspective. Focuses on collective board performance and does not address individual director skills and experience. 

3. External consultants 

Some more mature boards may engage an external consultant to manage the evaluation and development process from end to end, or facilitate specific milestones throughout the process. Consultants may be governance experts or industry experts, but ideally would be both. Consultants provide a guiding hand for boards who know they need to evaluate, but are limited by experience or time to manage the process themselves. Peak bodies are a good source for recommending consultants who have experience in the industry. Governance Evaluator is proud to offer independent consultantsas a supplement to our board and director evaluation processes. 

Pros: An external perspective of governance performance against relevant legislation and frameworks. Adds rigour and reduces subjectivity of the process. Expert guidance to enable the board to move beyond evaluation and into targeted capability building & development. Can assist the board to go from ‘not knowing what they don’t know’, to ‘knowing what they don’t know’, to developing strategies to address the identified issues. 

Cons: Can be expensive. Can be labour intensive. In some instances, the board may be left to write an action plan themselves, or are left with a generic action plan that is relegated to the bottom drawer until next year. 

4. Self-assessment 

Self-assessment is recognised by Aon, ASX, DHHS and AICD as well as peak bodies in health & age services (LASA, VHA, ACHG, AHHA), community (ACNC) and education (NESA) as a sound method for understanding and improving a board’s performance, as well as the skills and experience of individual directors. 

Some online tools available offer flexibility and ease of data collation and analysis. In addition, some tools can tailor their content to the specific requirements of board’s sector, and provide data and insights for boards to trend and benchmark their performance historically, as well as against others in their sector and across industries. 

Care must be taken to ensure that the self-assessment tool avoids the influence of subjectivity. This can be achieved through careful questionnaire design and analysis. To find out more about how leading self-assessment techniques achieve this, click here. 

Outputs of the self-assessment inform actions to build board capabilities where they are needed most. Governance Evaluator is founded on effective online self-assessment of board and individual director performance. 

Pros: Affordable. Can be managed internally if desired. Outputs enable the board to move beyond evaluation and into targeted capability building & development for the collective board as well as individual directors. 

Cons: Requires engagement in the process by board members. Can be subjective, unless it is part of a multi-faceted evaluation & capacity building process. 

As you can see, there are options available to suit all levels of governance maturity and investment capabilities. To discuss the best board evaluation and development program for your board, book in for a 15-minute governance health check below. 

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