Governance

The word governance has its origins in the Greek verb meaning to steer. Sitting at the core of governance is the idea of defining what success means for an organisation and utilising resources, inclusive of people, money and time to steer it towards that success. Governance encompasses the systems, processes and relationships through which an entity is directed or controlled.

In this section

In this section you will find a range of resources which help to define what good governance practice is and what the roles and responsibilities of the director are. Also included are a range of simple templates and other documents which will enable you to derive more value from your interactions with and on boards of directors.


The Four Pillars

The Institute of Directors’ flagship publication, The Four Pillars of Governance Best Practice, provides a substantive overview of the norms, theories, templates and requirements surrounding corporate governance.


Resources

The following resources provide guidance and insight into effective governance and links to some of the significant governance reports. Also see sector specific resources.

New Zealand
A Director’s Guide (2013), a joint publication by the IoD and Financial Markets Authority, sets out the essentials of being an effective director.

Directors’ Powers and Duties, 2nd edition is an excellent, and recommended resource. Written by Peter Watts, one of New Zealand's top scholars in company law and published in 2015, it provides governance professionals with a detailed treatment of the New Zealand law relating to directors’ powers and (civil law) duties, one of the most important and complex aspects of company law.

Corporate Governance in New Zealand Principles and Guidelines, A Handbook for Directors, Executives and Advisers, (2014), Financial Markets Authority.

Corporate Governance, A Practical Handbook, CCH New Zealand, 2012.

The IoD's Code of Practice for Directors, and Code of Ethics.

The Creative NZ Arts Council of New Zealand, Toi Aotearoa has released a resource guide entitled “Getting on Board”, tailored to arts organisations. The report is available here.

The Complete Guide to Good Governance in Organizations and Companies; by Doug Matheson, New Zealand, 2010.

Great Governance: How the Best Boards Work, by Doug Matheson (2008).

International
The Handbook of International Corporate Governance: A definitive Guide (UK IoD, 2nd edition 2009) provides commentary on key areas of governance around the world, including laws, models, codes and the role of directors.

The European Confederation of Directors Associations released two publications of note at the end of 2015:
Corporate Governance Compliance and Monitoring Systems across the EU, developed in collaboration with international advisory and accountancy organisation, MAZARS. Focusing on the implementation, monitoring and enforcement of Corporate Governance Codes they completed a survey to get an overview of the approaches adopted at a national level, around the world, and

A Guide to Directors’ Duties and Liabilities, developed in association with AIG which analyses the risks facing directors and how D&O insurance can offer legal and financial protection. Through case studies, the Guide highlights specific issues in a number of countries. The Guide covers risks to individual board members in particular, though risks to the company are also included.

OECD Principles of Corporate Governance (2015)

Policy Governance® Principles and Model Consistency Framework, International Policy Governance Association, 2013.

Australia
Guiding principles of good governance, Australian Institute of Company Directors (AICD).

Corporate Governance Principles and Recommendations, 3rd Edition 2014, ASX Corporate Governance Council.

UK
Corporate Governance Guidance and Principles for Unlisted Companies in the UK, UK IoD, 2010.

The Director’s Handbook, and The Effective Board, UK IoD, 2010.

The Financial Aspects of Corporate Governance, (known as the Cadbury Report) UK Financial Reporting Council, 1992.

Review of the role and effectiveness of non-executive directors, (‘Higgs review’), London, 2003.

In September 2014 the Financial Reporting council of the UK updated the UK Corporate Governance Code. The most recent edition can be found here

The British Standard for Delivering Effective Governance, BS 13500, British Standards Institution, 2013.

The Company Chairman; by Sir Adrian Cadbury, UK, 1990.

Corporate Governance and Chairmanship: A personal view by Sir Adrian in 2002.

North America
Report of the New York Stock Exchange Commission on Corporate Governance, September 23, 2010.

Corporate Boards that Create Value; by John Carver and Caroline Oliver, San Francisco, 2002.

Inside the Boardroom; by Richard Leblanc, Canada, 2005.

Video of presentation and panel discussing “Inside the Boardroom” and applying the concepts to Not-for-Profit organisations – “how do we create effective boards?”.


Useful supplementary information

A short paper from Stanford University (March 2014), Corporate Governance According to Charles T. Munger (Warren Buffet’s business partner), discusses trust-based governance versus the more usual control based cultures.

A William Carney article: The Legacy of “The Market for Corporate Control and Origins of the Theory of the Firm," 50 CASE W. RES. L. REV. 215 (1999) discusses the way in which markets influence the corporate governance of public companies, and Henry Manne’s contribution to our understanding of this area.

McKinsey & Co provide some insights into building a forward-looking board and argue that directors should gear their time and agenda towards future-thinking.

As a part of the Stanford University “Closer Look” Series, David Larcker and Brian Tayan examine some interesting perspectives from Charles T. Munger regarding an ideal or optimal system of corporate governance and the facilitation of effective decision making and ethical behaviour.

Bainbridge and Henderson published a paper in 2014 entitled 'Reconceptualising Corporate Boards'. The report is a discussion of the potential for board service providers as an interesting new model of governance. 


Board documents and administration

The IoD's Practical Guide to Minutes provides directors with information on minute keeping, obligations under the Companies Act 1993 and suggested practices to ensure the company’s approach to minutes is well executed.

The quality of board papers can have a strong influence on the efficiency and effectiveness of the board. The IoD’s Ten Top Tips for Better Board Papers provides guidance for those preparing board papers.

The IoD provides a sample board charter here.

The Institute of Community Directors Australia has produced a Policy Bank on their website which contains a range of free-to-download policies targeted to not-for-profits. There is a comprehensive library available to browse along with helpful tips in policy development.


Board appointments

If you are registering with the DirectorSearch database, or updating your CV, please use these guidelines to create a CV which is appropriate for directorship opportunities.

The IoD provides a sample:

  • letter of appointment for a chair
  • letter of appointment for a non-executive director

Committee terms of reference

The IoD provides sample:
Terms of reference for an audit committee
Terms of reference for a nominations committee
Terms of reference for a remuneration committee


Going public and staying public

A public offering is a transformational event for an organisation. Preparing for, and being listed on, a licensed market can bring both opportunities and associated challenges. The Financial Markets Authority prepared  ’Going Public – A Director’s Guide’, as an overview of what is to be expected in the role of a director in the process of an IPO.  

The IoD has launched a course on Public Company Directorship. Developed in partnership with DLA Piper, and supported by NZX and FMA, this new course focuses on the critical elements of public company directorship. Whether you’re a new or aspiring director wanting to grow into a public company directorship or a director in an organisation considering listing, this course will help you understand the aspects of directorship distinct to public companies and essential to being a successful public company director.

Once publically listed, there are a range of rules and principles by which companies should abide. Two key foundational documents for directors of listed companies are:

The NZX Listing rules: The main board/debt market listing rules

The FMA’s Corporate Governance in New Zealand - Principles and Guidelines: The principles outlined here can be applied more widely than publically listed companies, however these organisations are held accountable to them, through reporting, by the FMA.


Guidance for directors of banks

The International Finance Corporation provides a guide targeted to new directors which discusses board and director roles and responsibilities alongside risk and effective decision making in relation to the unique role of banks in business and the economy.