proprietary companies
public companies (both listed and unlisted)
companies limited by guarantee (many not-for-profit companies are incorporated in this manner)
companies limited by shares.

View the differences between these types of companies.

Do the powers derive from other legislation? For example, for government agencies it could be the state or local government Act, the Commonwealth Authorities and Companies Act 1997 or the Financial Management and Accountability Act 1997. A statutory authority would be enabled under its own Act.

A not-for-profit organisation could be subject to the Incorporated Associations Act of the state in which it operates.

Other legislation of relevance includes:

Structure — unique to each organisation

Any organisation needs to understand and document:

the identities and roles of the key stakeholders (for example, board of directors, members, executive management)
the powers vested in each stakeholder and the basis on which such powers rest (for example, do the powers arise from legislation, the constitution or other authorising document?)
the reporting responsibilities of each stakeholder and the identity of the stakeholder to whom those reporting obligations are owed (for example, the chief executive reports to the board, the board reports to members)
the extent of the board’s decision-making powers, the members’ decision-making powers, and executive management’s decision-making powers

Identities and roles of key stakeholders

Directors, members and executive management

Typically, the directors of an organisation have the power, acting collectively as a ‘board’, to:
- manage and direct the business of the organisation and
- exercise all of the organisation’s powers, apart from those specific powers which the law or the organisation’s constitution requires to be exercised by a resolution of the organisation’s members.
This is very clear in companies, which are constituted under the Corporations Act 2001 (Commonwealth), but may be less clear in government agencies.
The constitutions of companies usually contain a provision giving directors the power to manage and direct the company’s business.
Management powers are vested exclusively in the board in most instances, and cannot be usurped by the members.
The role of a company’s board of directors and the extent of its involvement in a company’s day-to-day management varies significantly depending on the type of company and the size, nature and complexity of its business or activities.
The role of a company’s directors is often articulated as a role of overseeing, guiding and monitoring the management and strategic direction of the company.
The board of directors is not expected to be involved in day-to-day management or decision-making. In most companies that conduct significant business, the power to manage the day-to-day conduct of the business is typically delegated to a chief executive officer and, depending on the size of the company, to a senior management team. However, the distinction between the role of directors and management is to some extent blurred by the dual role played by executive directors. Unlike non-executive directors, executive directors are employed by the company in a senior management position (such as chief executive officer or chief financial officer) as well as being directors of the company.
While these directors do participate in the day-to-day management of the company, it may be helpful to view this involvement as an aspect of their employment position rather than as part of their role as directors. In their capacity as directors, executive directors participate in the general oversight of the management of the business, bringing to the table the benefit of their knowledge and experience of, and involvement in, the day-to-day management of the company’s business.
Directors have a fiduciary duty under common law (and, if the business is incorporated under the Corporations Act, under statute) to act in the best interests of the organisation they serve.

CSA offers a half-day training program Duties of Officers and Directors covering the core duties and responsibilities of directors.

The powers vested in key stakeholders

Who appoints the directors? For example, under the Corporations Act, directors are appointed by members, but in a government agency they could be appointed by the shareholding Minister.
Who appoints the CEO? For example, under the Corporations Act, the directors appoint the CEO, but in a government agency the Shareholding Minister or the Secretary-General of a department could appoint the CEO.
To whom do the directors report ? For example, under the Corporations Act, the directors report to members, as well as the regulator Australian and Securities Investments Commission (ASIC) and, if a listed company, the Australian Securities Exchange (ASX), but in a government agency the directors could report to the shareholding Minister, a department or Parliament or all three.
To whom does the CEO report? For example, under the Corporations Act, the CEO reports to the board, but in a government agency the CEO could report direct to the shareholding Minister.

Other stakeholders

Organisations need to identify not only the key stakeholders, with legal rights and responsibilities, but also other stakeholders with an interest in the affairs of the organisation. These include:

employees
customers
suppliers
creditors
consumers
the broader community in which the organisation operates
regulators
the media.

Typically it is a matter for the board to consider the reasonable expectations of these stakeholders and assess what is appropriate in each company’s circumstances.

Documenting roles

An essential part of corporate governance is the distinction between authority, which can be delegated, and responsibility, which cannot. Directors, managers and employees are all accountable, but for different aspects of the operation and to a different extent in each case.

A board of directors is responsible for the governance of the corporation: they cannot abdicate that responsibility. Under the Corporations Act and the company’s constitution, directors have authority to make decisions on behalf of the owners (that is, the members, or shareholders). They may delegate that authority, for example, to senior management, and ought to do so systematically. The responsibility, however, remains with the board, and the directors are accountable for any failure of the system to operate as it should.

To assist the understanding of the respective roles, a company needs to develop policies and charters that set out the structure of authority and responsibility, and the roles attached to those responsibilities. The roles are as follows:

board (including chairman and non-executive and executive directors)
CEO (and senior management)
company secretary/administrator. CSA has a number of training programs, Accidental Company Secretary®, Government Corporate Secretary or Administrator, Not-for-Profit Board Secretary and Practical On-the-Job Skills for Company Secretaries that cover the statutory obligations and other requirements of the role and its core responsibilities
members (whose roles and rights are set out in the Corporations Act and the company constitution).

Matters reserved for the board of directors will vary greatly depending on the size of the company and the composition of the board in respect of non-executive and executive directors. Directors will decide over which of the following they have direct control or oversight:

nomination and appointment of directors, membership and role of board subcommittees
assessment of board performance and director remuneration
appointment, remuneration and assessment of performance of chief executive officer and other members of the senior management team
corporate governance matters, including frequency and agendas of board and committee meetings, and the appointment of the company secretary
matters pertaining to members including meetings, communications and relations
monitoring of company performance
reporting, including approval of annual reports and accounts
directors’ interests, conflicts of same and related-party transactions
delegation of powers and authorities
oversight of compliance with appropriate laws and regulations and major litigation. CSA has training programs available on Meeting ASIC Requirements and Meeting ASX Listing Rule Requirements
recommendations by management in respect of finance matters, internal and external audit, operational matters such as business strategy, operating budgets, risk management, human resources, sustainability policies, and political and charitable donations
significant mergers, acquisitions, restructures and divestments
approval of company policies
director and executive succession planning
appointments to subsidiary company boards.

CSA has a number of training programs, Duties of Officers and Directors, Financial Analysis for Officers and Directors, Risk Assessment for Officers and Directors and OHS Due Diligence to assist board members to undertake their duties.

Delegation of authority

Directors of an organisation have discretion conferred upon them by the Corporations Act (if the organisation is incorporated under the Act) and may also have discretion conferred upon them by the enabling legislation. The board may be able to delegate some of its functions.

It is good governance for the board to:

develop charters/terms of reference for any board committees established by the board
establish the basis of the power of the board committee, that is, whether it is advisory or delegated, and the extent of the committee’s authority
ensure that each committee of the board provides the board with regular reports of its activities
establish the process for setting up and terminating ad hoc committees including formalising their terms of reference and membership
clarify its expectations of management and monitor whether those expectations have been met, including clarification of whether the board uses the CEO or equivalent as a single point of delegation and holds this position accountable for meeting all the board's expectations for organisational performance
clarify the limits of financial authority delegated to the CEO or equivalent and any other limits to executive activity that the board sees fit to put in place
ensure that where delegations are exercised, that an appropriate system for the oversight of the exercise of those delegations is in place, monitored by management or the board as appropriate.