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Last updated: 30 November 2006
Chapter 9: Agency governance
Abbreviations
A list of the abbreviations used in this report is available in the Glossary
Since the 1990s corporate governance, within both the private and public sectors, has received worldwide attention. Highly publicised corporate failures in Australia and internationally have served to highlight the adverse consequences of poor corporate governance for direct stakeholders and the community at large. This increased focus by governments, international organisations, private sector regulators, public sector auditors and academics has driven legislative reforms, as well as a myriad of codes and guides to assist practitioners in implementing the structures and principles underpinning good governance. It has also prompted an expanding body of evidence-based research that is beginning to establish the linkages between governance and the micro-performance dimensions required for an organisation to meet its goals.
ANAO has defined corporate governance as the processes by which organisations are directed, controlled and held to account. It encompasses authority, accountability, stewardship, leadership, direction and control exercised in the organisation.1
Uhrig's definition of governance is similar but puts primary emphasis on the delegation of authority.2 He states that corporate governance encompasses the arrangements by which the power of those in control of the strategy and direction of an entity is both delegated and limited to enhance prospects for the entity's long-term success, taking into account risk and the environment in which it is operating. Uhrig notes, however, that there is no universally accepted definition of corporate governance, or agreement on the structures and practices that are required to achieve good governance.
ANAO goes on to note that public sector governance has a very broad coverage, including how an organisation is managed, its corporate and other structures, its culture, its policies and strategies and the way it deals with its various stakeholders. The concept encompasses the manner in which public sector organisations acquit their responsibilities of stewardship by being open, accountable and prudent in decision making, in providing policy advice, and in managing and delivering programmes.3 Some of these issues are covered in this chapter, but others, in particular culture and relationships with stakeholders, are covered in other chapters, notably Chapter 4 and Chapter 11.
Effective governance processes can have both direct and indirect benefits. At a direct level, effective governance processes provide the framework within which organisations can operate effectively. At the indirect level, they can also have an effect on employee satisfaction, and on the general public's perceptions of the effectiveness and integrity of the organisation.
Following a discussion of recent governance related initiatives being undertaken in other countries, this chapter examines the implementation of a selection of governance initiatives in the APS during 2005-06.
It then looks at the effectiveness of key governance processes, particularly the exercise of authority, stewardship and accountability. The chapter concludes by looking at links between employee perceptions of the effectiveness of governance processes and levels of employee engagement.
In this chapter
- ANAO, Public Sector Governance Vol 1, Better Practice Guide, July 2003, <http://www.anao.gov.au>
- J. Uhrig, Review of the Corporate Governance of Statutory Authorities and Office Holders, June 2003, <http://www.finance.gov.au/governancestructures/docs/The_Uhrig_Report_July_2003.pdf>
- ANAO, Public Sector Governance Vol 1, Better Practice Guide, July 2003, <http://www.anao.gov.au>
