The role of executive directors and directors is one that must add value to a public entity board.
The process to appoint a director is usually detailed in the board’s establishing legislation. It may involve appointment by the minister or appointment by the Governor in Council on the recommendation of the minister.
Employees of a public entity may only become a director where the establishing legislation requires this; or if the establishing legislation is silent, only where the government decides it is necessary. Some establishing legislation prohibits the appointment of employees as directors.
A chief executive officer is not usually a director. Employees appointed as directors are known as executive directors. Other directors are known as non-executive directors. Most directors are non-executive directors.
Executive directors, by virtue of their employment, have a more detailed knowledge of the public entity and its business and issues. They also have greater access to information than non-executive directors. As such, executive directors are uniquely placed to add value to a board.
Executive Director and Director Responsibilities
Executive directors, like all other directors, must ensure:
- they familiarise themselves with all aspects of the public entity
- ascertain all relevant information,
- make reasonable inquiries and
- understand the financial, strategic and other implications of all decisions of the board, not only those relating to their role as an employee of the public entity.
Executive directors have the same responsibilities and obligations as every other director. Executive directors must carefully balance the responsibilities of their role within the public entity as a ‘manager’ or ‘employee’ with their role and responsibilities as a director. They must not engage in or facilitate board discussions relating to small, trivial or operational details. These types of discussions and considerations are properly the subject and responsibility of management and not the board.
Directors must use their powers in the best interests of the public entity as a whole and not represent the interests of those who elected or appointed them.
In accordance with the Code of Conduct for Directors of Victorian Public Entities, a director must ensure that information gained as a director is only used for proper purposes and is kept confidential.
Reappointing a Director
Reappointment as a director to the board is not automatic, especially where a director has already served two terms.
The board should consider the following factors before recommending the reappointment of a director:
- statutory requirements
- board composition (specifically looking at skills, knowledge and specialist expertise currently required by the board)
- preparation for, and attendance at, meetings
- commitment, availability and overall performance and effective contribution to the board
- character and reputation
- specialised expertise, merit, skills and knowledge.
The board will need to balance the benefits of fresh ideas and enthusiasm of new directors against the experience and knowledge of current directors.