A new framework

Sections 6.1.1 and 6.1.2 established that the incidence of the usage of corporate governance performance indicators in Australian not-for-profit organisations is rare, yet corporate governance statements are reasonably prevalent. As noted previously, such statements in many ways fulfil the requirements to be classified as valid performance indicators, if expressed in quantifiable terms, which may be possible if they were binary measures. Section 6.2.3 described the dependence that boards have on tools that they can readily understand and implement.

Section 2.3.4 discussed board roles at length and sections 6.2.3 and 6.2.4 canvassed a variety of mechanisms that boards fulfil those roles.

A review of the literature has established that there is very little in the way of established processes or tool kits and mechanisms to determine corporate governance performance indicators and this has been reinforced by the findings so far, in this and the previous chapter. Where tool kits or mechanisms are established, not-for-profit boards have readily adopted them, consider for example, the usage of corporate governance statements. A key premise of this thesis is that boards need toolkits or mechanisms that they can readily understand and implement, and this premise is discussed in this section. It was noted above, that boards are free to determine their own role set, but in addition, they are free to determine how they carry out that role set. It has been previously stated in section 6.2.3 that boards use mechanisms and tools to carry out their work, and this section considers this proposition. A too narrow definition of ‘mechanisms’ would serve to limit the boards’ capacity to determine what means it employs to go about its work; mechanisms could include such systemic mechanisms as financial systems, risk management systems, compliance systems and strategic systems. These mechanisms often take the form of a commercial or business type orientation; ideally, they reflect the way not-for-profit organisations operate. However, mechanisms in this context can mean more than just using commercial or business systems and practices; it could mean using a certain higher order philosophical approach. In a religious not-for-profit organisation, for example, this could be having regard for Christian values such as “Lives changing and communities growing by care through Jesus Christ” described in the Anglicare (2010, p.2.) annual

report; as well as this sort of philosophical approach, an approach promoting virtues, such as ethics, accountability and transparency, may be added, and in a board context the Carver policy governance model (Carver 1997) could be added. As noted previously, one of the experts was very clear that the Carver model was the appropriate way to carry out a board’s role.

Boards use mechanisms to order and assist in the making of decisions; for example, they use agendas to order the items they will consider at a meeting and they use financial, risk and chief executive officer reports to oversee such matters as solvency, organisation performance and strategy implementation. Overall, these mechanisms are well developed and understood. Often underpinning these mechanisms are conceptual frameworks or an underlying set of ideas. In the financial reporting context, the underlying framework would be general accounting conventions and specific accounting standards; in the risk reporting context this may be the Australian Risk Standards (Standards Australia 2004) and in the chief executive officer reports, these may be general business communication techniques or perhaps even formats adopted in the organisation’s strategic plan.

It has been argued in this thesis that one way a board’s performance can be improved over time is to implement performance reviews of its own corporate governance activities against pre-agreed performance criteria. For boards to be able to successfully pull this off, they need a readily understood and accepted methodology, and before this can be derived a board framework also needs to be understood and accepted.

There can be no doubt that the difficulties and delays experienced by the Bicycle Victoria Incorporated board can be attributed to the episodic nature of the board and particularly board committees. This exercise was but one of the many tasks that the board decided to tackle at any one time. In addition, contributing to the difficulty was the fact that generally understood and accepted methodologies or frameworks did not support such work. The action research study makes it extremely clear that this is a difficult and arduous task that should not be underestimated. The wider data, not just the action research study, provides guidance to boards wishing to establish their own performance indicators.

The literature review observed that several authors, such as De Lacy and De Lacy (2004), Carter and Atkinson (2006) and the AICD (2006), advocated the improvement of corporate governance practice by keeping it simple and building on what is currently in existence. As noted in section 5.4.3, Bicycle Victoria Incorporated continuously improved its corporate governance performance. Similarly, it was recommended in section 1.5.3 to start with what you have got and build on that, and it is notable that the usage of corporate governance statements is more prevalent.

This section has established that current mechanisms of developing corporate governance performance indicators is mostly impractical, because they are either too time consuming or they fail to produce valid corporate governance performance indicators, yet there are two factors that offer opportunity for not-for-profit boards to enable them to reach their goals:

1. the current usage and acceptance of corporate governance statements 2. evidence that continual improvement and ‘small steps’ may be possible.

The next section advances the argument for the drivers of a new performance indicator framework.