corporate governance framework for public bodies

The Governance Framework

for Public Bodies

&

The PBMA Act Public Enterprises Division, MOFPSS

Oct 2014

Corporate Governance

May 2016 Public Enterprises Division, MOFPS 2

CG embodies processes and systems by which corporate entities are directed, controlled, managed and held to account. It influences how objectives are set and achieved; how risk is monitored, assessed and how performance is optimized. It encompasses authority, accountability, stewardship, leadership and direction of an organization.

Corporate Governance


Corporate Governance involves the totality of the systems and procedures that ensure that a culture of accountability permeates the organization, so that individuals know what their responsibilities are and are equipped with the appropriate tools and skills to exercise them.

It seeks to promote effective systems of control and accountability and responsible attitudes on the part of those handling government resources

Relationship betweenGood Governance Practices and

Performance


Sound Governance

Policies

Sound Leadership

- Improved Company

Performance

- Achievement of National

Economic Goals

Development of Governance Framework for Public Entities

May 2016 Public Enterprises Division, MOFPSS 5

Background: Public sector entities - critical element of

the overall delivery mechanism relied on by government to transmit policy goals to the population.

Persistent history of weaknesses in the governance - undermined their effectiveness in fulfilling their mandate to undertake a range of administrative, service delivery and regulatory functions.

Since 1980s consideration given to instituting a structured framework to address the accountability and efficiency of public sector enterprises

The need was further highlighted in the 1990s when GOJ had to assume substantial debt obligations on the divestment of two large public sector entities

Development of Governance Framework for Public Entities


The Public Bodies Management and Accountability (PBMA) Act -:

Introduced in 2001

amended in 2003, 2010, 2011 , 2014 & 2015

Is applicable to all Public Bodies

Public Bodies


Public Bodies (PBs) – Defined as Statutory Bodies/Authorities/Government

Companies (approximately 190 active ones)

Integral to the development and implementation of key policy objectives of the Government at any point in time

Are either fully funded (from the Consolidated Fund), partially funded or ‘self-financing’.

Are held accountable to various statutory requirements:

PBMA Act, Companies Act, Enabling Statute, FAA Act, Regulations and policies)

The Act is the Authority that guides the Corporate Governance Framework (CGF), and seeks to promote improved Corporate Governance of Public Bodies.

It provides a structured framework in which the following can be achieved:

Consistency and harmony in the rules governing their operations.

Ensure greater compliance with overall government policy.

Improve their operating performance.

The PBMA Act

May 2016Public Enterprises Division,

MOFPS 8

Development of Governance Framework Key Provisions – PBMA

Act


Boards given mandate to govern public bodies with emphasis on ensuring efficient, effective & accountable management (S.6 Corporate Governance)

Public Bodies to adhere to GoJ’s Procurement guidelines (S.6A)

PBs to prepare and submit Corporate Plans/budgets by Nov 30 each year.

Creation of audit committees mandated - with clearly defined roles and indication of composition (S. 8, 9)

Duty of care and disclosure for directors of public bodies (S.17, 19)

Development of Governance Framework Key Provisions – PBMA

Act


Indemnification of Directors (S.19 A-C)

Criteria for formation of new public bodies (S.21)

Regulations (S.24)

Provides for sanctions for breach of specified provisions of the Act (S.25) (e.g. late submission of annual report – report sent to Attorney General for action)

Supremacy of the PBMA Act in relation to PBs (S.27)

The CGF was approved by Cabinet via Cabinet Decision No. 33/11 dated 29 August 2011 and tabled in Parliament via Ministry Paper #78 on October 4, 2011

The Revised Framework was approved via Cabinet Decision No. 39/12 dated November 12, 2012 tabled in the Houses of Representative November 20 and 23, 2012 respectively via Ministry Paper #100/12


MOFPSS 11

CGF- BACKGROUND

CGF - BACKGROUND


The CGF for Public Bodies is intended to strengthen the mechanisms for accountability of the Boards, Chairperson, Chief Executive Officer, and Company Secretary and other key personnel

Ensure that the public interest is advanced by adherence to proper standards and codes of conduct.

Strengthen the governance accountability systems of public bodies in order to facilitate greater probity, transparency and efficiency in the functions of government.

Corporate Governance Framework (CGF)


The principles addressed in the Corporate Governance

Framework under the following headings: Governance of Boards Role and Responsibilities of the Board Role of Chairman Role of Chief Executive Officer (CEO) Role of Corporate Secretary Role and Authority Board Invitees Role and Authority Ex-Officio Officers Board Composition Board Diversity & Equality Issues Board Selection and Appointment

Corporate Governance Framework (CGF)


Board Orientation, Sensitisation & Professional Development Board Performance Evaluation Role and Independence of Audit and Internal Control Functions Role of the Board in Enterprise Risk Management Monitoring Arrangements of Ministries Role of the Ministry of Finance Board Information Management & Disclosure Managing Stakeholder Relations Code of Ethics Corporate Social Responsibility

CGF – Elements & PrinciplesGovernance of Boards

Permanent Secretary (PS) is administrative head of portfolio ministry

PS provides guidance on implementation of policy

Every PB should be headed by an effective Board

Collectively responsible for strategic oversight, serves as the focal point for Corporate Governance.

Board to decide PB’s values & strategies and leadership to achieve objectives

The Board is accountable to the Responsible Minister


MOFPS 15

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CGF – Elements & PrinciplesRole & Responsibilities of the Board

Retain full and effective control over the strategic direction of the Public Body

Allow the CEO to take full responsibility for day to day operations

The Board is the primary decision making authority of the Public Body

Constitutes the fundamental base for corporate governance for the Public Body

Determines the committees needed for effective governance

Leads the recruitment and performance evaluation of the Corporate Secretary

Appoints CEO, sets performance standards & evaluates performance


MOFPS 16

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CGF – Elements & Principles Role of the Chairperson


Ideally, the position of Chairperson should be separated from that of

the Chief Executive Officer and must be

independent and have no executive or

material connection with the Public Body.

Authorises and oversees the execution of the annual performance evaluation of

the entire Board and individual members

Provides direction to the Corporate SecretaryLeads the Board in

reviewing the performance of CEO

Ensures formal process of orientation, sensitisation &

prof. development

CEO reports to the Board through the Chairperson

CEO is responsible for the day-to-day operations of the Public Body in accordance with mutually agreeable and written performance objectives

CEO determines which strategic activities are delegated to team members and is responsible for the performance appraisal of direct reports.

CGF – Elements & Principles Role of the CEO


MOFPS 18

Role of Corporate Secretary Every Board should appoint a Corporate Secretary (CS)

with a clear Terms of Reference (TOR) to execute critical administrative and governance functions on its behalf, which demand a high degree of compliance and ethical conduct.

There is a need to separate the roles of Legal Officer and Corporate Secretary in large organizations/large operations. Corporate Secretary should report to the Board directly.

CS acts a source of guidance to Board - assists on matters relating to Corporate Governance (including board orientation, sensitisation & professional development), effective operations of the Board, regulatory compliance and ethical conduct.

CS should work with the Chairperson to coordinate the evaluation of the Board, its Committees and individual members.

CGF – Elements & Principles


MOFPS 19

Role and Authority of Ex-Officio Officers

Ex-Officio Officers should have the same duties, responsibilities, rights and privileges as do all appointed Board members, including the right to vote.

Permanent Secretaries should not be appointed to

Boards under their portfolio responsibility The MOFPS will establish in the Code of

Conduct the rules of engagement for Ex-Officio Officers.

CGF- Elements & Principles


MOFPS 20

InIInvitees: experts on specific matters. consistent long term

relationshipsvoting at Board Meetings May 2016

Public Enterprises Division, MOFPS 21



Board Composition Every business is unique and should likewise be matched with

the appropriate set of skills and competencies to enable it to carry out its functions effectively, efficiently and productively.

Upon the change of a Minister, the existing Board should offer its resignation which would not take effect until a new Board is duly appointed – a maximum period of 60 working days is recommended. The roles and responsibilities of the Board during the transition period will be outlined in the Code of Conduct for Directors.

MOFPS & Permanent Secretaries with input from the portfolio Minister should develop a competency profile for each Board which identifies the knowledge, experience, discipline and personal attributes required for the effective oversight of the Public Body.



Board Diversity & Equality Issues

The Board should be composed of persons with diverse skills, knowledge, qualifications, experience, gender and age to assist the Public Body in achieving its objectives and perform its functions to add optimal value to the Public Body: ‘The Cabinet reaffirmed the National Policy for Gender Equality by articulating in Cabinet Decision No. 5/15 dated February 2, 2015 that Temporary Special Measures be adopted so that 30% of the Boards of Public Bodies should be composed of women.



Board Selection and Appointment The responsible Minister, or other authority, should

appoint Board members based on merit, against objective criteria with due regard for diversity and commitment to the policy objectives of the Government – Database of Potential Directors being compiled to assist the Minister;

Directors being considered to serve on the Boards of Public Bodies should have the appropriate skills and experience and the ability to commit adequate time to serve;

Directors should be subject to Fit and Proper test for ‘significant’ public sector entities or a ‘due diligence’ for others.

Board Performance Evaluation Requires the establishment of a performance appraisal

process for Boards of Public Bodies which would evaluate the performance of the Board, its committees, Chairperson and individual Directors.

The evaluation should address whether the objectives of the Board and committees are being met in an effective and efficient manner. Evaluations will be used to identify training needs and determine re-appointments.

The results of the evaluation will be submitted to the Responsible Minister.

The MOFPS is responsible for the development of an effective performance evaluation system for Boards.



MOFPS 25



Role and Independence of Audit and Internal Control Functions

The Board should ensure that the Public Body has effective internal control systems which are critical to the Corporate Governance regime of the Public Body, and include Internal Audit and Procurement for which Board Committees should be assigned responsibility.

Every Board should establish an Audit Committee, consisting of persons with suitable qualifications, skills and experience and be independent non-executive directors. The majority of its members should be financially literate with at least 1 member being a qualified Accountant

The Audit Committee should be responsible for the oversight of the internal audit systems and leads the recruitment and performance evaluation processes for the Chief Internal Auditor.



Role of the Board in Enterprise Risk Management

Every Board should put in place a formal Enterprise Risk Management (ERM) framework to manage risk across all functional areas and business units of the Public Body.

The risk profile of a Public body includes: operational, business, regulatory, market, credit, economic, capital and HR related risks.

The Board must ensure that an ERM framework is designed to identify, assess, prioritise, monitor and manage risks to the Public Body. The Board should ensure that the Framework is implemented, monitored and controlled.

CGF – Elements & PrinciplesMonitoring Arrangements of Ministries


The Permanent Secretaries, as chief advisors to the Ministers, should monitor

performance against expected results, manage risks and advise/inform the

Minister accordingly.

The PS should also know what is happening in the Public Bodies in order to assess whether the strategic objectives of the Ministry are being met. Functional responsibility should be assigned for the monitoring of Public Bodies within each Ministry.PS should have input in corp. plans/budgets Monthly/Quarterly reports should be submitted to PS and MOFPS



Role of the Ministry of Finance & the Public Service

The MOFPS as custodian of the PBMA Act provides an overarching governance framework to the Public Bodies, to ensure they operate in such a manner as to bring sustainable economic and social benefits to the country.



Board Information & Disclosure The Ministry of Finance and the Public Service is responsible for

developing a ‘Board Information & Disclosure Policy’ which should include the types of information to be disclosed and the time for it to be disclosed. The annual report should include a section on issues related to Corporate Governance such as;

Full compensation package of the CEO & Senior Managers Names, expertise, meeting attendance record of Board members

Boards may seek exemption under Access to Information Act when dealing with sensitive matters. The Act provides basis for exemption.

The Board should, in applying the policy, give due consideration to the risk of disclosure of information in the particular circumstance.



Managing Stakeholders’ Communication & Relationships

The MOFPS is responsible for developing a protocol on communicating with stakeholders and the media. The Public Body should ensure it has a clear and coherent understanding of its key stakeholders, their information needs and the most effective means of communicating with them.

Every Board should ensure that its PB has a procedure and strategy for responding to stakeholder concerns on a continual basis in a proactive and transparent manner.



Code of Ethics

Each Board should observe the Code of Ethics developed by the MOFPS as part of its Corporate Governance regime. However, each Board may enhance aspects of the Code where necessary, based on its particular operations, in keeping with guidelines established by the MOFPS.

Boards should be mindful and guard against ‘Conflicts of Interest’. The Code will articulate the mechanism to identify, disclose & manage them.

CORPORATE SOCIAL RESPONSIBILITY (CSR)Every Board should ensure that measures for

managerial performance take into account the financial, social, cultural and environmental issues with a focus on their customers and stakeholders/shareholders

Each Public Body should develop and publish in its annual report a statement on its CSR activities.

The MOFPS will develop a CSR Framework which should include a donations policy.



MOFPS 33

CGF – Implementation Update


FY 2015/16 Draft Competency Profile Instrument developed

– resubmitted for approval of new Cabinet Identifies core competencies for the Board Chair, Board Members & Board Technical Competencies for Boards within each portfolio Ministry Board Chair – 15 competencies including:

a. General Managementb. Strategic Leadership & Planning, c. Communication

Board Member -14 competencies including:a. Financial Literacyb. Accountabilityc. Government Operationsd. Professionalism

Board – 8 Specialised Competencies for Boards:

a. Human Capital & Industrial Relationsb. Managementc. Finance & Accountingd. Citizen Centrice. ICTf. Legalg. Marketing/Corporate Communications and h. Risk Management



MOFPS 35

FY 2015/16Draft Code of Conduct for Directors in

Public Bodies developed – resubmitted for approval of new CabinetAuthority for the Code is derived from Section 6.2 of

the PBMA.All Board Members are expected to abide by the

principles set out in the Code of Conduct. It sets the minimum standards to guide the actions and behaviours of directors on Boards.

The Code of Conduct will be drafted as Regulations to the PBMA Act and submitted to Parliament for approval.



MOFPS 36

Code of Conduct PrinciplesGovernance of Boards

Board Composition, Selection & AppointmentBoard Charter

General Conduct of Boards/Board MembersRoles & Responsibilities of the Board – guidelines for

transition periodRole of the CEORole & Authority of Board InviteesBoard Performance EvaluationCode of Ethics



MOFPS 37

SchedulesFit & Proper Code of Ethics

Conflicts of InterestConduct of Business & Fair Dealing – GiftsUse of Non-Public Information & DisclosureUse of Public Body Funds, Assets & Information



MOFPS 38

FY 2016/17Selection & Appointment PolicyBoard Performance EvaluationStakeholder Communication PolicyFY 2017/18 Code of Audit Practice & Regulations Enterprise Risk Management Framework Board Information & Disclosure PolicyFY 2018/19 Corporate Social Responsibility



MOFPS 39

Corporate Governance Framework


The Framework is accessible at www.mof.gov.jm

Thank You

corporate governance framework for public bodies

Government & Nonprofit