Strengthening governance in Aboriginal Corporations

I have spent over a third of my career working in the audit, advisory and commercial space with Aboriginal Corporations and businesses, including large Native Title structures. I have served on boards and committees for a number of such organisations. I have also served on the boards of a number of large public and private companies. My observations below draw on some of these experiences. 

Royalty streams flowing through larger Native Title structures over the lifespan of the associated mining activities can reach hundreds of millions, sometimes billions of dollars. Capital accumulated from these income streams is often used to invest into various investment portfolios or commercial enterprises. Land use agreements, heritage oversight and Native Title compliance matters can create considerable complexities and challenges for the boards of these organisations. With this in mind, it is critical that the governance frameworks for these organisations continue to evolve in order to align with needs and expectations for increased accountability, transparency and strategic capabilities, and to ensure that risks are appropriately managed. 

Prescribed Bodies Corporate (PBCs) are primarily regulated under the Native Title Act 1993 (Cth) and by the Office of the Registrar of Indigenous Corporations (ORIC) under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act). In many cases these corporations often have commercial arms that sit under holding structures governed by the Australian Securities and Investments Commission (ASIC). Navigating and ensuring compliance with these regulatory regimes requires skill, vigilance and rigour. Success and sustainability for these corporations also necessitates managing the needs and wishes of an often diverse membership base, which must be managed with an appropriate degree of cultural sensitivity. A final overlay of challenge is the need to ensure that there is clarity between the respective roles of the board, management and members of the corporation, in order to minimise the risk of ambiguity, misunderstanding, and conflict. 

Some areas of required focus in achieving governance success as I see them: 

• The selection and role of the Chair is critical – the Chair must possess the skill set to facilitate effective board meetings and manage relations with the CEO. It is also important to avoid the temptation to allow the CEO to become a shadow Chair.
• It is important that the Chair and the other directors recognise the Chair does not have the right to direct the operations of the corporation in isolation without appropriate board indorsement. All directors must understand that decisions should be made in the best interests of the broader membership and free from personal bias.
• Invest in a talent identification and leadership development program to identify and upskill future board members so as to increase the pool and capability of potential directors.
• Invest into tailored governance and financial literacy training for the directors.
• Choose independent directors carefully based on them possessing relevant skills and a genuine desire to contribute to knowledge transfer and Aboriginal Economic Development. Do not engage talking heads that may feel the need to fill every moment of silence and over communicate their views – directors should be respectful and considered.
• Ensure that the performance of all board members is evaluated on an annual basis and the outcomes appropriately discussed at a board level.
• Perform a rigorous selection process and reference checks when appointing a new CEO. Ensure that they have measurable KPIs and that they are held accountable for their delivery against these.
• Implement a robust strategic plan with measurable outcomes and regularly assess execution against this plan at a board level.
• Make sure that appropriate financial delegations are in place and adhered to.
• Provide timely and understandable financial reporting to the directors.
• Ensure appropriate processes are in place to identify and manage conflicts of interest.
• Deliver clear and regular information updates to members – it is human nature to be suspicious of something you don’t understand.
• Ensure that there is regular outreach and engagement with members.
• Implement a transparent and fair membership policy and put safeguards in place to protect from unfair bias in evaluating membership applications.
• Achieve an appropriate mix between member director representation and individuals with relevant industry and commercial experience on the boards of commercial enterprises. Seek to minimise the potential for frequent changes in board composition as a result of rolling changes arising from the AGMs of the corporation.
• Ensure that the corporation has direct ownership and board control of all subsidiaries to avoid the potential for these enterprises to go rogue.
• Make sure that there is a suitably skilled Audit, Finance and Risk Committee in existence, that it has an appropriate charter, that it meets with sufficient regularity and that it presides over a sufficiently robust risk management framework.
• Avoid the temptation to “go it alone” too early when embarking on new commercial ventures. There is real merit in considering a partnership with another organisation in order to spread and have access to expertise, support and knowledge transfer. Choose carefully and ensure that potential business partners can demonstrate a genuine ability and willingness to provide support, engagement and knowledge transfer.

This is a very challenging landscape.  

There are some great success stories of progressive Aboriginal Corporations hitting the high notes and achieving balanced outcomes for their members, contributing to the creation of inter-generational wealth and driving forward with significant commercial enterprises. Opposingly, there are also a number of not-so-great stories where there have been governance failings, and the wheels have fallen off. There is no room for complacency – be brave, vigilant and consult when necessary.

^{The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Crowe.}