Good Governance Series #5
“Too often, we miss out on opportunities in this life because we were too busy waiting for them to fall into our lap that we missed them tapping on our shoulder.”
Daniel Willey
Limitations of the AICD Review
The PMSA has announced its “Governance Review” and the Australian Institute of Company Directors (AICD) has published the Issues Paper.Submissions can be made by stakeholders directly to the AICD until 2 April 2018.
The Issues Paper, together with the previous Scope of Work, are available on the PMSA website, and on the face of it, seems to be a step forward in the pathway to better governance of our schools.
Whilst we commend the PMSA for being open to a review and thank the AICD for accepting the contract, we still have concerns.Those concerns are fundamental to whether you, as a stakeholder, decide to participate.
The concerns are:
The scope of the review; and
The fact that source documentation is not available as part of the review.
The fourteen queries posed in the PMSA Issues Paper can be found at the conclusion of this blog.
1. The Scope of the Review
The scope of the review set by the PMSA and outlined in the Scope of Works is very narrow, particularly in the context of the governance structure of the PMSA, which is not the subject of the review.You can read more about that here:
Unfortunately, the refusal of the PMSA to review all aspects of its governance, including its structure and constitution, gives rise to a massive loss of opportunity - a loss of opportunity to utilise the time, energy and expertise of stakeholders, the Churches, the AICD and the PMSA to work collaboratively to significantly improve governance to a best practice standard and achieve true systemic, long lasting, positive change for our four wonderful schools.
As the PMSA’s review currently stands, we are spending a lot of time, energy and money on putting new wallpaper over the ever-widening cracks in the wall.We are being asked by the PMSA to jump on the train without knowing our desired destination.Surely as stakeholders - educated, independent adults acting in the best interests of the students and staff - we shouldn’t be taken on a mystery ride, destination predetermined but as yet unspoken? This is, of course, the PMSA’s long-standing modus operandi.
The severe limitations of the review come down to one sentence:
The AICD’s current scope of work is confined to matters of governance within the existing parameters set by the PMSA Constitution.
That means that we are only being asked to review 1 out of the 10 principles listed in the AICD’s own publication “ Good Governance Principles and Guidance for Not-for-Profit Organisations”. As we have seen from our ‘Good Governance’ blog published 12 March 2018, the other 9 principles are essential to achieving the 8 elements of good governance. You can read this blog here;
In short, this review will not lead to improved governance, good governance or best practice governance, irrespective of the changes it brings about.
As a reminder, the 10 principles of Good Governance and Guidance for Not-for-Profit Organisations are:
Roles and Responsibilities – currently outside of scope for the reasons outlined below.
Board Composition – partially within scope, as outlined below
Purpose and Strategy – outside scope as outlined below
Risk – recognition and management – outside of scope
Organisational performance – outside of scope as outlined below
Board effectiveness – outside of scope as outlined below
Integrity and accountability – outside of scope as outlined below
Organisation building – outside of scope
Culture and ethics – outside of scope
Engagement – outside of scope as outlined below.
By limiting the Scope of Works and the 14 submission questions to a very narrow part of one element of good governance of not for profits, it ensures that structural inadequacies of the PMSA and the schools are retained and inefficiencies are uncurtailed.Most importantly, it prohibits exploration of options for systemic review.
But what about the statement by the AICD at footnote 2 in their Issues Paper which states:
The AICD is aware that some stakeholders have called for the PMSA to adopt a new legal structure. The PMSA’s Constitution can only be amended with the agreement of both the Presbyterian Church of Queensland and the Uniting Church in Australia Queensland Synod. While recognising this, it should be noted that many changes are achievable in reforming the PMSA’s By-Laws, Charters and Council Manuals (including delegations and reporting lines) without changing the Constitution.
Of course this is correct.So why are we concerned that the scope of the review excludes changes to the Constitution?The answer lies within both footnote number two above and footnote seventeen following:
The AICD has been advised by the PMSA that the Members of the PMSA Council are also the Members of the PMSA.
Putting that together, there are no external “members” that the PMSA Councillors are accountable to, such as shareholders in the usual sense, because the PMSA Councillors are the only members.It even excludes the Churches from this important role.
It is like the situation where the Directors are also the only Shareholders, a common practice in tightly held private companies.You expect this in private and family companies because it is their own invested money and the funds are not protected by generous tax concessions.That is not the case here.The reason why this is so rare in large not-for-profits is that the current PMSA Councillors didn’t generate these assets from their own work product, and there should be accountability to external parties including the Churches, current and past students, staff, parents and even to the Australian taxpaying public in general.
Looking at the Constitution, the Churches are only mentioned in four clauses.Clause three; “Government” such that the PMSA reports annually to the Churches (but the clause doesn’t dictate what is included in those reports), clause four; “Councillors” such the Churches agree to their proportionate appointment of PMSA Councillors, clause five; “Casual Vacancies”, again about the appointment of PMSA Councillors, and clause eighteen; “Amendment”.
Clause eighteen of the Constitution of the PMSA states:
The Councillors may from time to time with the consent of the Presbyterian Church and the Uniting Church alter the Constitution of the Association. Either of such consents may be given before at the same time or after the resolutions of the Councillors.
So, amendments to the Constitution require the consent of the Churches.However, changes to the By-Laws, Charters and Council Manuals do not.See clause 9.1 of the PMSA By-Laws:
9.1. Make, Repeal or Alter.
When acting under Clause 15 of the Constitution, Council may make, repeal or alter its By-laws provided that the By-laws so made or so altered are not inconsistent with the Constitution and are adopted in general meeting.
Even more enlightening is clause 5.2.4 of the By-Laws in relation to “Delegations of Powers to a Committee”:
5.2.4. In the exercise of any powers delegated to it, a committee formed by the Councillors must conform to the directions of the Councillors. (emphasis added)
The inability of this review to recommend changes to the Constitution will mean that the repealing or amendment of the recommended changes to the By-Laws, Charters and Council Manuals will not be inconsistent with the Constitution because the Constitution doesn’t deal with such matters in the first place.
The result will be that this whole exercise, everyone’s time, everyone’s effort, the expertise of the AICD and resources which could have been spent on improving the schools, may very well result in lasting change of – a few weeks or months at most, purely at the whim of the PMSA Councillors.
So why are the Churches supporting this if this is the case?It’s a good question and one we don’t have an answer to.We suspect the answer lies in history, and the general reluctance of large institutions to acknowledge the need for systemic change, even when the calls for change are loudly banging on the front door.
The limitations underpinning this review means this process:
will definitely NOT result in more autonomy by the School Councils;
will definitely NOT result in more financial transparency of each school’s operation; and
will definitely NOT result in concerns relating to child protection, cultural failings, HR practice management or donor funding drop offs being addressed.
2. Source documentation
So what issues does the AICD submission process cover?Why are stakeholders asked to submit responses when they don’t have a copy of all of the relevant PMSA documents, including Charters and Council Manuals?
Surely at least those who would like to make a submission should have to hand a copy of one of the current School Council Charters?
Isn’t this necessary to determine exactly what the PMSA Council does and what each of the four School Councils do?
Why were these documents not appended to the Issues Paper and available to all? Or even available on the PMSA website on the same page as the Constitution and By-Laws?
The Issues Paper at footnote 55 states:
http://www.pmsa-schools.edu.au/. Currently School Council Charters and other PMSA Council Committee Charters are not publicly available.
We consider it appropriate to view source documents when asked to advise or asked for an opinion.Relying on another’s summation, regardless of the reputation and integrity of that other, is fraught with danger and can often result in poor advice.
The fact that stakeholders are asked to provide recommendations and opinions, but have not been given access to even the most fundamental of the source documents, the various School Council Charters, reminds us of the shared experience outlined by Dr Sarah Kelly and Mr Ian Macdonald in their joint statement of 27th October 2017, where they state in relation to the independent investigation report by Q Workplace Solutions:
As a result, the 3 independent community member and the Principal have never seen the Investigative Report however the PMSA members of the Somerville School Council have not only read the report but have made their own interpretations of its content;
In our view this is never good practice, and we leave it up to each individual stakeholder to determine if this inadequacy will encourage them or discourage them from participating in the review.
Luckily, we have what we believe to be a current copy of the template of the School Council Charters.Hopefully we can shed some light on what is likely to be in those documents.
We still advise to proceed with caution.Ask the AICD for your own copy of the relevant School Council Charter.Ask the PMSA as well.
Many may choose not to submit a response to the Issues Paper unless and until they receive the current version of the School Council Charter for the school they are connected to.
3. The Issues Paper
Issues 1-4 of the AICD review are about the PMSA Council itself, its composition, reporting and tenure. But remember, the Scope of Works “is confined to matters of governance within the existing parameters set by the PMSA Constitution”.
The PMSA Constitution sets out the qualifications of the PMSA Councillors, their undefined reporting to the Churches, and their tenure.So if the existing parameters of the Constitution are not to be amended, then these are just wish list questions, and as stated by the AICD itself in relation to question 2:
Please note that the AICD has been advised by the PMSA that this constitutional requirement, including the right of each Appointing Church to appoint up to six PMSA Council members, is unlikely to change.
So issues 1-4 are merely feel good wish list questions with a stated and inbuilt barrier to any amendment.It feels like a waste of time, energy, expertise, money and resources.
Issue 12 How to Leverage the PMSA’s Strengths relates to leveraging the collective strengths of the PMSA. In my view most of the strengths listed are actually the unique aspects of each of the four schools. Those strengths would exist regardless of the legal structure of the PMSA or even the existence of the PMSA itself. Again, just a wish list type of question with no clear intention or process for implementation.
Issue 13 Reporting to External Stakeholders is again very much a wish list item, given the limitation of the scope of the review in relation to the Constitution. Remembering that the only document of the PMSA which requires the Churches input and approval is the Constitution, and the annual reporting requirement to the Churches in that document is unspecified and not defined.
Issue 14 What other governance matters do you consider are important and the AICD should be particularly focusing on as part of its review? This is the ultimate wish list question and the AICD even refer to potential responses as “suggestions”. At least it is included as a question and although the AICD may include some of the suggestions in their report to the PMSA, the suggestions will not be recommendations as they are outside the scope of the review.
By far the major focus of the AICD review is outlined in Issues 5-11, which are focused on the School Councils.This is where most people are focused but let’s just put the School Councils and the School Councillors in context within the PMSA corporate structure:
There is only one legal body, the PMSA, therefore there is only one decision making body, the PMSA Council.
The PMSA Council can delegate to its various subcommittees, including the Educational and Pastoral Care Committee, the Audit and Finance Committee, and the Appointment and Remuneration Committee.
Equally, the four School Councils are subcommittees of the PMSA, and hence any delegations are dictated by the PMSA Council.
Whilst a delegation may be exercised by a particular subcommittee, the decisions are not “decisions” as such, but mere recommendations.The PMSA Council is the single decision making body due to the fact that there is only one legal entity by reason of the Letters Patent.
It is important to remember that in relation to the delegations to a subcommittee, the PMSA Council may:
Not accept the recommendation of the subcommittee and make its own decision which nullifies the recommendation; or
Accept the recommendation of the subcommittee and confirm by reason of its own decision.
Any delegation may, even though delegated, be also exercised by the PMSA Council.
Any delegation may be withdrawn from a subcommittee by the PMSA Council at any time.
The PMSA Council may force a School Councillor to vacate office under various terms and conditions.
The School Council doesn’t have a quorum unless at least 50% of School Councillors are in attendance, at least one of whom must be a PMSA Councillor.
And don’t forget By-Law 5.2.4 as outlined above - a committee formed by the Councillors must conform to the directions of the Councillors.
So absolutely, the School Council is tasked with ensuring the operation, maintenance and development of the School, but there are significant limitations placed on the delegations to the School Council including:
They can’t appoint the Business Manager of the school without prior consultation of the PMSA Council;
They can’t appoint the Principal or the School Chaplain (these are powers held exclusively by the PMSA Council);
They can’t authorise expenditure above certain limits even where such expenditure relates solely to that one school;
They can’t appoint other School Council members; this power is held exclusively by the PMSA Council;
The School Council cannot approve or develop school policies and procedures which are group policies or procedures.It is important to note the child protection policies and human resources management policies are both significant PMSA group policies and procedures which significantly impact our student’s experiences and safety at school, and hence are outside the scope of the School Councils;
The School Council cannot obtain any borrowings;
The School Council cannot acquire, dispose or mortgage real property; and
The School Council cannot approve school strategic plans or approve annual school budgets.
As stated in the AICD submissions paper, the School Councillors may develop the school strategic plan and budgets, but note that they cannot approve such plans as that is a power held exclusively by the PMSA Council.So they do the hard yards but don’t make the final decision.
And what would be more important to a School than its strategic plan and budget?
I don’t know about you but reading that list of what they cannot do, I’m a bit concerned that they have very little delegated recommendation making abilities above that expected to be exercised by a competent CEO, our School Principals.
So a reminder of what they do have delegated to them as an extract from the “Committee Charter - School Council” policy adopted by the PMSA Council in October 2012:
those of its powers sufficient to enable the ................ School Council, within limitations set by PMSA Council, to:
(a) ensure the operation, maintenance and development of the school; and
(b) enter into contracts; and
(c) invest monies. “
The PMSA Council may withdraw any or all of these powers and delegations at any time. (emphasis added)
As parents of Somerville House will recall, this withdrawal of delegations was effectively and quite recently demonstrated by two events in 2017.The standing down of the Communications Director of the School by the PMSA Council, and the reinstatement of employment of the previous Business Manager by the PMSA Council after his resignation was accepted by the School Council.
Both of these instances were in relation to the employment of staff at Somerville House so delegated to the Somerville House School Council, but in the end these delegations were swiftly withdrawn and instead executed by the PMSA Council.
Our School Councils at present, are operating relatively effectively within these limitations.And the limitations are outside the scope of this review.So what exactly makes it work, or doesn’t make it work?
The answer is simple; it just takes agreement.
As long as the recommendations of the School Councils are agreed to and adopted by the PMSA Council, then it all works.If the School Councillors exercise independent thinking and make a different recommendation to that as desired by the PMSA Council, then it doesn’t work.Remembering the limitations on the possible candidate pool of the PMSA Council, as noted in our Good Governance blog on Skills Comparison, compared to the desired skills sets of the School Councillors.
So, it begs the question, why stack our best, our respected and experienced educators and professionals on a School Council, ask them to exercise independent judgement, and then disempower them when they try to make the best decisions for each School?Wouldn’t the more appropriate question be not how we select the best School Councillors, but how do we empower them to make the best decisions for the Schools.
This empowerment can only come with changes to the Letters Patent structure and the wording of the Constitution of the PMSA. The Constitution is the only document where changes:
have any hope of longevity;
are immune from meddling by a simple majority of the PMSA Council; and
require the input and consent of the Churches.
Empowering those individuals by changing the Letters Patent structure and wording in the Constitution will, in itself, be the best selection criteria for future School Councillors and ensure we have a choice of experienced, well respected and well-regarded educators and professionals.
We have seen what happens when the School Council gives a recommendation that doesn’t sit well with the PMSA Council. The end result is the loss of a long standing and respected Principal, the loss of a Communications Director of a School, copying of private and confidential data of School Foundation members without authorisation, a very expensive six-month employment (and subsequent termination) contract of the Executive Manager of the PMSA, and mass resignations from a School Council.
And of course the resulting reputational damage to the Schools, the individuals involved, students and staff, all the other stakeholders and even the Churches.
You don’t even need to take my word for it, you can read the statements from two well respected and now former Somerville House School Councillors, Mr Ian MacDonald and Dr Sarah Kelly in their joint statement of 27 October 2017:
Dr Kelly resigned because she considered there to have been decisions made by the PMSA which had been directed to the Somerville School Council which had involved fundamental failures of governance and due process and with which she strongly disagreed.
Mr Ian MacDonald resigned from the School Council on 26 October 2017 stating that “I can no longer stomach the behaviour of the PMSA council. When I find out about yesterdays events from an AHISA (Association of Heads of Independent Schools of Australia) email notice to principals, it simply says to me that there is no regard by the PMSA for me or the independent councillors. I think Somerville is a great school and deserves governance by competent people of integrity with some educational understanding at least.
So it seems an awful lot of everyone’s time, effort and expertise is being spent on this issue of the School Council, when really so long as the School Council doesn’t exercise independent thinking and judgement divergent to the PMSA view, there won’t be any problems. That is only if we are limited by the current Scope of Works presented by the PMSA to the AICD.
Unless we request a better governance review, one that looks at all the elements of governance, without limitations, we will find ourselves very quickly back to the status quo. The stakeholders have quite firmly stated that they aren’t satisfied with the status quo.
The only way forward is structural reform of the legal structure of the PMSA - the Letters Patent and the Constitution. Those two documents are the very foundation of everything underpinning the Schools, the bedrock if you will.
By Laws, Council Charters, Council Manuals and delegation policies are all created, formed, amended and discarded by the PMSA Council itself with no accountability or transparency elements built in because at the moment there are no accountability and transparency elements built into the Letters Patent and very very few are built into the Constitution. Remember, the only members of the PMSA are the PMSA Councillors themselves, the Issues Paper states that as a fact provided to them by the PMSA. The Churches only have the very limited powers in the four clauses in the Constitution outlined above. The Churches currently have, and after this review still will have, no ability to enforce any provisions in the School Council Charters.
Unfortunately, this review can’t build in those accountability and transparency elements, as much as it would like to try, because the scope of the review is restricted such that there is an exclusion of changes to the current Constitution and legal structure of the PMSA.
So, despite the wonderful ideas that will be submitted, despite the vast experience of the AICD in conducting reviews, despite the time, effort, and monetary contribution by you and me, the stakeholders and the Australian tax paying public through financial grants from government, we are all contributing to this process with pretty much both hands tied firmly behind our backs. Especially given that those wishing to make a submission haven’t even been given a copy of the PMSA School Council Charter.
Now is the perfect time for an unlimited, back to basics governance review, with all options on the table and all relevant documents disclosed. The stakeholders are wanting it and are prepared to be engaged. I’m sure the Churches do not want to be spending more time, energy and dollars on “reconciliation and healing sessions”, side issues and mere window dressing.
