Principle 2: The board structure and composition ensures relevant expertise and diversity

Board members have the necessary skills, experience and knowle​​dge to enable the board to collectively fulfil its role. Consideration is given to optimising gender, racial, cultural and other forms of diversity relevant to the role and function of the board.

Struct​ure

Appropriate board structure is vital for ensuring good governance. Board structure refers to the size and composition of the board, including its independence, the presence of representative members and the balance of gender, racial, cultural and other forms of diversity, skills and experience.

A board operates most effectively when its members have different skills, knowledge and experiences. The responsible minister and board should understand the board's structural requirements to fulfil the agreed role. When determining composition and succession planning, consideration should be given to the:

  • current performance of the board
  • competency and experience mix of board members
  • values of the public sector body, board and board members
  • length of service of current board members
  • diversity of current board members
  • specified compositional requirements, including representative obligations
  • availability of potential board members to fulfil requirements.

Appointment​s

The board should understand the process for appointing members, including the responsible minister's role in this process. An appropriate process should exist for board member succession, with emphasis on the timing required for replacement to maintain a balance between new and existing board members.

While boards may not have the ability to appoint their own members, they should ensure that a transparent and accountable process exists for any recommendations to the minister. Appointments to boards should occur on the basis of merit and transparency. For representative nominations, stakeholder groups should be encouraged to consider the merit of applicants in relation to the requirements of the board.

A board skills matrix is an important tool to assist a board to identify any gaps. In an immediate sense, this might mean that a board needs to look at professional development for members. In a strategic sense, a board skills matrix can be used as a tool to identify potential members for recommendation to the minister to address the identified skills gaps and longer term board succession planning.

Further information on a board skills matrix can be found in the resources section.

Indepen​dence

The board should have sufficient independence to discharge its responsibilities. Where permitted by legislation, the chairperson should be independent. A lack of independence can contribute to increased complexity in managing conflicts of interest and reduced efficacy of the board. Factors or relationships that may negatively impact on the independent management of issues should be identified at the commencement of the board meeting, and decisions made on actions to mitigate this impact.

Board ​committees

It is common for boards to delegate aspects of their work to committees of the board. This allows the board to distribute its workload and enables the subcommittee to perform a detailed analysis of important or sensitive matters before making recommendations for the board to consider. The board, not the board committee, is accountable for all decisions.

When assessing its strategic priorities, the board should consider what types of committees it may require. It may have several ‘standing’ or permanent committees, such as a finance or an audit and risk committee, with other committees established as required. Board committees need to be established with:

  • a specific charter, with clear terms of reference
  • delegations that do not undermine the board’s delegations to the CEO
  • an appropriate number of directors, including a majority of non-executive directors, if allowed by the enabling legislation
  • procedures for making and keeping agendas and minutes, and reporting to the board
  • a clear expectation that the decision making responsibilities of the full board are not to be compromised by the activities of any board committee, and that significant issues will be reported to the board for the board to discuss and decide upon.

The board must continually monitor the activities of each committee as part of its duty of care, diligence and good faith. A committee’s charter should be evaluated annually to ensure it is appropriately focused and that the committee is fulfilling its functions. If not, amendments should be made.

Quick r​eview – Structure and composition

Is the board aware of the process or requirements for board appointments, including the role of the minister?

  • Is the board aware of the process or requirements for board appointments including the role of the minister?
  • Does the board use a ‘skills matrix’ to ensure members have the necessary skills, experience and knowledge to enable the board to fulfil its purpose?
  • Is there sufficient diversity on the board?
  • Has the board developed a succession plan to identify the skills needed by the board?
  • Are board members able to commit the time required to effectively undertake their role?

Resou​rces

Further information is available under good governance guides.


Page last updated 23 May 2017