How to improve governance

When most people think of corporate governance, they probably think of listed public companies and how they are managed by boards of directors in the interests of – or perhaps contrary to the interests of – shareholders.

But the principles of good corporate governance are just as applicable to local governments and the ways in which councillors manage council resources.

Local councils have a responsibility to manage public funds and resources transparently and in the best interests of their constituents, much like corporations have a responsibility towards their shareholders.

There are of course important differences between councils and corporations. Local councils have to balance the interests of diverse stakeholders, including residents, businesses, and interest groups, while corporations primarily focus on shareholder interests. And local governments operate in a political environment and may be subject to greater public scrutiny.

Nevertheless, local councillors will benefit from reflecting upon the relevance of corporate governance principles to their roles and responsibilities.

Nick James and Tory Baumfield

The key principles of corporate governance that are relevant to local governments include transparency, accountability, ethical conduct, and effective decision-making processes.

  • Councils should be open and transparent about their decision-making processes, financial management and operations. This can be achieved through public meetings, publishing council minutes and budgets, and establishing clear communication channels with residents.
  • Councils should have robust accountability mechanisms in place, such as independent audits, code of conduct enforcement and performance monitoring. This ensures councillors and staff are held responsible for their actions and decisions.
  • Councils should establish and enforce strict ethical standards, including policies on conflicts of interest, gifts and benefits, and whistleblower protection. This helps to prevent corruption and maintain public confidence in the integrity of the council.
  • Councils should have well-defined, decision-making processes, particularly on significant matters that impact the community. These processes should involve appropriate consultation, analysis of options and impacts, and clear rationales for decisions made. Effective decision-making processes contribute to good governance and accountability.
  • Councils should be responsive to the needs and concerns of their constituents. This can involve actively seeking community input, implementing effective complaint handling processes, and demonstrating a willingness to address community issues promptly.
  • Councillors should exercise responsible stewardship over public resources, ensuring they are managed efficiently and in the best interests of the community. This includes sound financial management, asset maintenance, and long-term planning.

Poor governance in local councils can have severe consequences, such as misallocation of resources, corruption and a loss of public trust. Unfortunately, there are many cases of alleged misconduct and corruption in local councils that have led to unpleasant consequences including referrals to the Crime and Corruption Commission, the dismissal of councillors, and the appointment of administrators. Councillors have been investigated and prosecuted in connection with allegations ranging from the failure to disclose or to recuse oneself from deliberations relating to political donors, misconduct related to the treatment of local government professional staff, misuse of authority, and failing to comply with good governance legal obligations.

To improve corporate governance, councils should develop clear policies and procedures for decision-making, procurement, and financial management, as well as establishing robust oversight mechanisms like audit committees and risk management processes.

Importantly, local councillors should prioritise ongoing education and training. This could involve attending workshops and seminars, and seeking guidance from governance experts. Bond University, for example, offers a microcredential on enterprise governance that is of direct relevance to local councillors.

Ultimately, good corporate governance in local government is essential for ensuring effective service delivery, responsible use of public funds, and maintaining public trust. By adopting best practices from the corporate sector and tailoring them to the needs of local governments, councils can better serve their communities and uphold the principles of transparency, accountability, and ethical conduct.

Article author Professor Nick James and Assistant Professor Tory Baumfield are from the Faculty of Law, Bond University.

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