Good Governance under the spotlight

The Mainzeal High Court decision has attracted attention from the governance community and is a timely reminder for all governance professionals to be cognisant of their responsibilities as guardians of good governance.

The Mainzeal High Court decision is based on directors’ duties regarding insolvent and reckless trading, and has identified breaches of the Companies Act 1993 by the Mainzeal directors.

From a legal perspective, there are lessons for current and future directors, focusing on Sections 135 and 136 of the Act .

From a governance perspective, the decision raised a number of significant issues, focusing on the board of director processes:

• The monitoring and oversight role of the board. Good governance requires a proactive board which focusses solely on its business and safeguards the interests of the company.
• A board membership that has the skill-set, expertise and independence to exercise good judgement, with a board charter that identifies roles, responsibilities and accountabilities.
• A functioning Audit Committee of the board with the financial skills and judgement necessary to monitor and oversee the company’s financial management.
• An effective risk management strategy, overseen by the board, with a functional Risk Committee.
• A board which recognises potential power imbalances in its membership; processes to prevent boardroom decisions adverse to the company, and a Chair able to manage these issues.
• A code of conduct to inform board and company decision-making, with appropriate board oversight and reporting.
• Clear boardroom policies on potential conflicts of interest, and the ability to have these managed.

Good governance focusses on the above; poor governance fails to address these issues.

Governance New Zealand actively promotes good governance practices which focus on the above, whereas poor governance demonstrates a failure to address these issues. Being a well-trained qualified governance professional has never been more important. For more information about our professional education programme visit the Governance New Zealand website.