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ABC saga highlights importance of defined governance duties
The controversial sacking of Michelle Guthrie and subsequent resignation of Justin Milne from their respective positions at ABC highlight the importance of clearly-defined and separate responsibilities of a board and a company’s management team, says Governance Institute.
Jerome Doraisamy
“When leadership structures include a managing director role, the distinction between the role of directors and managers may become blurred because they have board and management responsibilities,” explained Governance Institute’s acting CEO Meegan George.
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“Boards that fail to establish a clear delegation of authority to the CEO and management run the risk of interfering unnecessarily and inappropriately in the operations of the organisation.”
Good governance requires an appropriate separation between the board, who have an oversight role, the Institute explained, while management are responsible for the implementation of strategic objectives and performance.
These principles are also relevant for public sector entities, such as the ABC, it posited.
“The allegation is that the ABC chair became too involved in the domain of management, particularly in relation to staffing,” Ms George recounted.
The CEO normally has delegated authority, she continued, from the board to manage the daily running of the organisation, and as the chosen leader, that person is responsible for the effective functioning of the organisation.
“The CEO has a clearly defined role to work with the management team to achieve the vision and implement the strategy of the organisation.”
The role of the board, on the other hand, is to guide and monitor the management and strategic direction of the organisation. That is, to steward and have oversight, she said.
“As leader of the board, the chair’s role is to ensure all directors contribute effectively and promote constructive and respectful relations between directors and between the board and management,” she concluded.
The comments from Governance Institute follow comments from law firm McDonald Murholme that the dismissal of Ms Guthrie from her role should have a “lasting impact” for employment law cases in the future.
