The role of Policy governance can be thought of as developing a set of marker buoys on a rowing course. The buoys outline the course within which the rowers must stay. Similarly, policies outline the boundaries within which the organisation and chief executive are to operate. It is the role of the board to set the buoys, both for itself and management and desirably, to do so before an event occurs. Developing policy once an event occurs runs the risk of the circumstances of the event defining the policy rather than a detached perspective being applied to the formulation of the policy. By being proactive in setting policy, the board establishes the environment to enable it to ‘speak with one voice’ thus providing clear guidance for the Chief Executive.
What are the marker buoys or the components of Carver’s policy governance?
Carver identifies four components which are:
• Strategic results or Ends policies;
• Governance process policies;
• Board-staff linkage policies;
• Chief executive limitations policies.
Strategic Results or Ends Policies
These polices spell out what the organisation’s Purpose is (why does it exist), the organisational Values, the mission for the next 3-5 years (what will the organisation look like), the goals for the next 3-5 years and the priorities.
Developing Ends Policies is a unique task for each organisation and is clearly the role of the board.
Governance Process Policies
The governance process policies describe the way in which the board will conduct its own business. They describe the board’s philosophy, accountability and its job description.
Typical policies which the board is responsible for developing include:
• Criteria for becoming a board member
• Preparation of directors for their role
• Induction of a new board member
• Job or role description for a board member
• Linkage between the board and the owners or members
• Policy making
• Code of ethics and proper practice
• Governance processes
• Work planning and agenda setting
• Conflicts of interest
• Confidentiality
• Board evaluation
• Chairman’s role description
• Risk
An example of a governance process policy is the Code of ethics and proper practice:
Code of Ethics and Proper Practice
The [name of organisation] is committed to the adoption of ethical conduct in all areas of its responsibilities and authority.
Directors:
1. Shall act honestly and in good faith at all times in the interest of [name of organisation] and its members/stakeholders, ensuring that all stakeholders, particularly those who are recipients of services, are treated fairly according to their rights;
2. Shall carry out their duties in a lawful manner and ensure that [name of organisation] carries out its business in accordance with the law and the terms of its own constitution;
3. Shall act in a manner that is consistent with and models [name of organisation] core values;
4. Shall avoid conflicts of interests in as far as this is possible. Where such conflicts arise, the Director/s concerned will act within the terms of the Board's Conflict of Interests policy;
5. Shall be diligent, attend Board meetings and devote sufficient time to preparation for Board meetings to allow for full and appropriate participation in the Board's decision making;
6. Shall observe the confidentiality of non-public information acquired by them in their role as Directors and not disclose to any other person such information;
7. Shall act in accordance with their fiduciary duties, complying with the spirit as well as the letter of the law, recognising both the legal and moral duties of the role;
8. Shall interact with the Board and [name of organisation] in a positive and constructive manner;
9. Shall be loyal and supportive to the Board, abiding by Board decisions once reached;
10. Shall not do anything that in any way denigrates [name of organisation] or harms its public image;
The Board:
11. Shall meet regularly to monitor the performance of management and [name of organisation] as a whole, and to do this the Board will ensure that appropriate monitoring and reporting systems are in place and that these are maintained and utilised to provide accurate and timely information to the Board;
12. Shall ensure that there is an appropriate separation of duties and responsibilities between itself and the Chief Executive and that no one has unfettered powers of decision making;
13. Shall ensure that the independent views of Directors are given due consideration and weight;
14. Shall ensure that members are provided with an accurate and balanced view of [name of organisation] performance including both financial and service provision;
15. Shall regularly review its own performance as the basis for its own development and quality improvement;
16. Shall carry out its meetings in such a manner as to ensure fair and full participation of all Directors;
Board – Staff Linkage Policies
The board – staff linkage policies describe the relationship the board intends to have with the Chief Executive and the organisation by spelling out how its accountability and its transfer of authority to the Chief Executive is to occur.
Typical policies which the board is responsible for developing include:
• Board responsibilities to the Chief Executive
• Monitoring the Chief Executive’s performance
Chief Executive Limitations Policies
The Chief Executive Limitations policies put boundaries around the Chief Executive’s discretion to develop and implement products and services to achieve the ends or outcomes agreed by the board. By stating which actions or situations are unacceptable, the board in effect creates a boundary or enclosure within which the Chief Executive is free to act without further board involvement or approval. Decisions that fall outside the boundary are the board’s to make.
Typical policies which the board is responsible for developing include:
• Chief Executive responsibilities
• Budgeting and financial planning
• Financial reporting
• Investments
• Protection of assets
• Remuneration and benefits
• Public affairs
• Treatment of owners/members
• Treatment of staff
An example of a Chief Executive Limitations Policy is the Chief Executive responsibilities policy:
Chief Executive Responsibilities
The job of the Chief Executive is to manage [name of organisation] in accordance with Board policy and commonly accepted business and professional practice and ethics.
Accordingly the Chief Executive shall not:
(i) fail to operate at all times within the constitution and regulations of [name of organisation];
(ii) cause or allow any practice, activity, decision, or organisational circumstance that is in any way unethical, unlawful, imprudent, or which violates any Board policy or expressed Board values;
(iii) conduct any business activity which is clearly outside [name of organisation] competency areas;
(iv) fail to keep the Board informed of the true and accurate position of the outcomes of products and services, financial position, significant management issues and all matters having real or potential legal / organisational risk considerations for the organisation;
(v) fail to submit data in a timely, accurate and understandable fashion addressing the various issues to be monitored by the Board;
(vi) fail to inform the Board of significant trends, implications of Board decisions, issues arising from policy matters or changes in the basic assumptions upon which the Board's Strategic Results policies are based;
(vii) fail to present information in a manner which enhances Board members’ understanding of the issues contained therein;
(viii) fail to keep Board members informed when for any reason there is actual or anticipated non-compliance of a Board policy;
(ix) fail to marshal for the Board as many staff and external points of view, issues and opinions as needed for fully informed Board choices;
(x) fail to inform the Board of such occasions when it violates one of its own policies;
(xi) fail to seek Board approval on all matters having real or potential legal considerations for [name of organisation] including all new contracts entered into over $xxx;
(xii) fail to ensure that there are effective communication channels relevant to the Board’s task;
(xiii) fail to deal with the Board as a whole except when responding to individual requests for information or requests from Board committees or working parties;
(xiv) fail to have a complete manual of sound operational practices in line with industry norm and best practice;
(xv) fail to seek board approval for position descriptions of all new staff and/ or changes to existing position descriptions of senior management;
(xvi) fail to involve the board in the appointments process of senior management positions.
In developing the above policies, the board should be aware of the principle that the policies are simply a tool for governance – they do not, in themselves, constitute governance.