1.4 Corporate governance
- What is corporate governance?
- Incorporation laws
- Where does corporate governance fit?
What is corporate governance?
If governance is they way in which people organise themselves for a common purpose, corporate governance is the rules, processes and systems of an organisation – the way things are run.
Corporate governance comprises the activities of both incorporated and non-incorporated organisations that are usually accountable to a board of directors or other elected representatives. Such organisations include privately-owned and operated (e.g. businesses), publicly owned (e.g. hospitals, schools, government agencies), and collectively owned (e.g. by family, clan or community groups).
Corporate governance issues tend to be concerned with the role of the governing board, their relationship to top management (the CEO or executive director), and their accountability to shareholders or stakeholders.
Responsibility for corporate governance rests with both the board and the senior managers (the CEO or Executive Director).
Important areas of corporate power and authority are:
Corporate governance makes sure people do the things they should, and don’t do the things they shouldn’t.
Incorporation laws
Many funding bodies require groups to become incorporated before they can receive money for programs or services. Incorporation means forming a corporation.
Indigenous organisations are incorporated under different national, state and territory legislation, each with their own legal requirements and conditions.
Members of governing boards should understand these laws, and the rules their organisation operates under. These laws limit their powers and require governing members to carry out particular responsibilities.
The Office of the Registrar of Indigenous Corporations (ORIC) has an electronic rule book on its website (it’s also available in hard copy) that corporations can fill out. This helps corporations create their own rules that suit them but also comply with Australian corporation laws.
See: ORIC Rule Book: http://www.oric.gov.au/Content.aspx?content=publications/ruleBook.htm&menu=start&class=start&selected=Rule%20book
ORIC has prepared a table listing features of the different Commonwealth, state and territory incorporation laws. It also highlights the benefits of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).
This table will help you learn more about which laws might suit your organisation best.
See: Resource 1.7 Snapshot—Comparative table of incorporation legislation (ORIC)
Where does corporate governance fit?
The corporate governance of Indigenous organisations is usually performed with other kinds of governance, such as community, family, and traditional forms of governance.
Often, Indigenous groups decide to incorporate because they want to receive funding. This means they also have to abide by the requirements of the legislation and their funding bodies.
It is here that we often see a different emphasis between Indigenous and non-Indigenous views of ‘good governance’:
See: Resource 1.9 What can we do?—Organisational governance
Read next: 1.5 Governance in Indigenous organisations
Read previous: 1.3 Community governance