Directors of water businesses are subject to a number of statutory and common law duties.
Private vs. Public sector Directors’ Duties
There are some important differences between public and private sector directors’ duties.
Public sector directors must comply with the statutory directors’ duties from the following
sources:
• the Public Administration Act 2004 (Vic) • Directors’ Code of Conduct
• Common law directors’ duties
In addition to these, directors of water businesses must also comply with requirements as set out in the Water Act 1989 (Vic).
Private sector directors, on the other hand, are subject to the directors’ duties set out in
the Corporations Act 2001 (Cth) and like public sector directors are also subject to common law directors’ duties.
Figure 5: The source of water directors’ duties compared with the source of private sector directors’ duties.
Water Business Directors Private Sector Directors
Water Act 1989 Directors’ Code of Conduct Public Administration Act 2004 Common law Directors’ Duties Corporations Act 2001 (Cth)
The Public Administration Act 2004 (Vic)
The Public Administration Act 2004 (Vic) sets out the expected standards of behaviour across the public service and applies to directors of water businesses.
The Act is administered by the State Services Authority which aims to foster the
development of an efficient, integrated and responsive public sector. Its key functions include:
• promoting high standards of integrity and conduct in the public sector
• promoting high standards of governance, accountability and performance for public entities.
Section 7 of the Act sets out the values that have been identified to ensure good governance across the Victorian public sector. They are:
Responsiveness Impartiality
Integrity Accountability
Respect Leadership
Human Rights
In applying these principles, water industry directors must:
• ensure any statement of corporate values is consistent with these public sector values • model the values and ensure staff are informed of them
Requirements for public sector directors
Section 79 of the Act states that a director of a public entity must at all times in the exercise of the functions of his or her office act:
(a) honestly; and
(b) in good faith in the best interests of the public entity; and (c) with integrity; and
(d) in a financially responsible manner; and
(e) with a reasonable degree of care, diligence and skill; and
(f) in compliance with the Act or subordinate instrument or other document under which the public entity is established.
Section 79 also states that a director of a public entity must not improperly use his or her position or any information acquired by him or her by reason of his or her position,to: • gain an advantage for himself or herself or another person; or
Requirements for Boards of public entities
Section 81 of the Act sets out behavioural standards for Boards of public entities and states that a board must ensure that:
• they act consistently with the functions and objectives of the entity
• they keep Ministers abreast of risk management procedures and risks to effective operation of the entity
• they respond to requests for information from the Minister • there is a code of conduct in place for directors
• there is a procedure in place to deal with conflicts of interest • there are procedures in place for proper conduct of board meetings • there is an adequate gifts policy for directors in place
• there are procedures in place for monitoring directors’ performance
Accountability provisions
Section 85 of the Act states that a board of a public entity is accountable to the responsible Minister and that the Minister responsible for a public entity is responsible to the Parliament in respect of:
• the exercise by the public entity of its functions
• the exercise by the Minister of his or her powers in relation to the public entity including: – the power to appoint directors or remove them from office, or
– the power to recommend the appointment or removal from office of directors; – the power to give directions to the public entity or request information from it; – the power to control or affect its operations;
– the power to initiate a review of the public entity’s management systems, structures or processes.
Directors’ Code of Conduct
In addition to public sector values, the Public Sector Standards Commissioner, a senior member of the State Services Authority, has issued a Directors’ Code of Conduct that is
binding on all public sector directors.
The Code states that directors must: • act with honesty and integrity
• act in good faith in the best interests of the public entity • act fairly and impartially
• use information appropriately • use their positions appropriately • act in a financially responsible manner • exercise due care, diligence and skill • comply with the establishing legislation • demonstrate leadership and stewardship.
Assistance with interpreting the Code
To assist directors in their interpretation of the Code, the State Services Authority (SSA) publishes guidance notes which further explains each duty and provides some practical
examples.
The SSA also produces more detailed guides to public sector governance including: • Welcome to the Board
• The Good Practice Guide on governance for Victorian public sector entities
Directors’ Duties under the Water Act 1989 (Vic)
Part 6 of the Water Act 1989 (Vic) sets out some specific requirements for water directors.
Use of information
Section 108 states that a director of a water business must not make improper use of information to create pecuniary advantage or with intent to damage the water business.
Pecuniary interests
Section 109 onwards sets out some rules that apply to directors who have a pecuniary interest in any matter in which the water business is concerned. Provisions cover: • Disclosure of pecuniary interests
• Definition of pecuniary interests • Voting rights
Targeted training for water directors
Training for directors of water businesses is co-ordinated by the Victorian Water Industry Association (VicWater) and provides directors with a two-day training and networking program. Held in conjunction with the Office of Water, training gives new directors the opportunity to:
• Gain a good understanding of water governance framework • Gain a deeper understanding of directors’ duties
• Have the opportunity to work through real life practical examples • Network with other directors and senior DSE staff
Appointment & Remuneration
Appointment process
Under s 97 of the Water Act 1989 (Vic) the Minister for Water is responsible for appointing board members for each of the water businesses. In the case of Melbourne Water, this responsibility is shared with the Treasurer.
The recruitment is co-ordinated by the Office of Water with the assistance of senior representatives from the DTF and the water industry.
All appointments must be endorsed by Cabinet under government guidelines.
Directors’ remuneration
Under s 98 of the Act, Directors’ remuneration is set by the Minister for Water and for the Melbourne Water Corporation this function is shared with the Treasurer.
Protocols for public sector executive remuneration are established by government and managed by the Government Sector Executive Remuneration Panel (GSERP) which is supported by the State Services Authority.
As statutory authorities, water businesses are required to report on their remuneration practices to GSERP.
Reporting requirements
Under the Statement of Obligations, a water business must annually review and report to the Minister of Water and the Treasurer on the performance of the Board of the water business.