Public Affairs Ireland | Training and Development | Conferences

Tom Ferris is a Consultant Economist specialising in Better Regulation. He was formerly the Department of Transport’s Senior Economist.

The Government this week published a new Code of Practice for the Governance of State Bodies. At the launch of the publication of the Code, the Minister for Public Expenditure and Reform, Paschal Donohoe TD, said:

“The key benefit of the updated Code of Practice for the Governance of State Bodies is that it provides greater clarity regarding the roles and responsibilities of the Board of a State body.

It comes into operation on Thursday 1 September.

 

What is new in the Code?

The new Code challenges commercial and non-commercial State Bodies to achieve high standards of corporate governance. The fundamental features of the Code do not differ significantly from earlier versions. It does, however, revise and update earlier versions. The first set of guidelines on corporate governance in State bodies, entitled “State Bodies Guidelines”, was published by the Department of Finance in March 1992. The guidelines were updated in October 2001 and May 2009. This new Code has now been updated and takes account of governance developments, public sector reform initiatives and stakeholder consultations.

The new Code provides an up-to-date framework for the application of best practice and is intended to take account of developments in respect of oversight, reporting requirements and the appointment of Board members. It is based on the underlying principles of good governance: accountability, transparency, probity and a focus on the sustainable success of the organisation over the longer term.

As well as the main text, the Code has four accompanying documents. They deal with:

  • Business and Financial Reporting Requirements;
  • Audit and Risk Committee Guidance;
  • Remuneration and Superannuation; and
  • Board Self-Assessment Evaluation Questionnaire.

 

Is the Code sufficient?

The Code is very comprehensive and lays down a wide range of rules for State Bodies. However, they are only guidelines and are not mandatory. This would not stop the Government making them mandatory if it so wished. Having a Code means striking a balance between the need for strong accountability and the requirement to support the appropriate autonomy of State Bodies under their legal frameworks and the environment within which they operate. As Minister Donoghue put it:

“In light of the scale and diversity of roles carried out by State bodies, the Code is not a ‘one size fits all’ document, but rather acts as a framework to ensure that both commercial and non-commercial State bodies meet the highest standards of corporate governance commensurate with their significant public roles and responsibilities.”

The introduction of a Board Self-Assessment Evaluation Questionnaire is interesting. The intention is that each Board member will complete their State Body’s self-assessment questionnaire independently. The Chairperson of the Board, after collating and reviewing the responses, is expected to lead a discussion on the key issues arising from the questionnaire. The focus of the discussion is expected to focus on areas where improvement is required or where there is a wider variation in responses to the issues raised in the questionnaire. It is not clear whether the results remain within the province of the Board or whether a summary is forwarded to the relevant Minister. Either way, it is very ambitious to expect that a self-assessment process would fully identify where improvements might be made. The process might, however, work better if an external evaluator were to be engaged for such an exercise.

 

The Code is expected to be a ‘living document’

The Press Release states that

“The Code is intended to be a living document and will evolve with best practice.

If that is to happen then much effort needs to be made to embed the requirements of the Code into the culture of each State Body.  It is the responsibility of Boards to ensure that efficient systems and procedures are in place to ensure that good governance can be applied effectively. But corporate governance cannot be confined to the boardroom. It involves a number of relationships – relationships between a company’s Board, its management, its shareholders and its other stakeholders (such as its employees and the community in which it operates). Accordingly, all State Bodies should be encouraged to provide on-going communication to all their staff about the requirements of the new Code, using social media, speeches, staff meetings and articles in newsletters and magazines. These vehicles should help to develop a strong culture of corporate governance.

Leave a Reply

Your email address will not be published. Required fields are marked *