BOARDS OF DIRECTORS AND MANAGEMENT COMMITTEES

Many people contribute to their communities by serving on Boards or Management Committees, whether paid or unpaid. This sheet explains the responsibilities of Boards and Management Committees for organisations, including those not regulated under the Corporations Act.  Managers and HR practitioners need to understand organisational governance, as Boards and Committees set strategy, influence policies, and ensure compliance, directly affecting human resources and operations.

Organisational Governance

In Australia, organisations will be regulated by one of the following governing legislations:

• Corporations Act 2001 (Cth): regulated by Australian Securities & Investments Commission (ASIC)

• An Incorporation Act (State based): regulated by Australian Charities & NFP Commission (ACNC)

Corporations Act 2001

A Company Limited by Guarantee is a federally incorporated structure established under the Corporations Act.  A Board of Directors is appointed.  Under the Corporations Act, an organisation may operate nationally.  Financial reporting requirements apply according to Company size. 

Incorporated Associations

An Incorporated Association is an incorporated structure, often applicable to smaller community based organisations formed under state based Associations Acts.   Financial reporting requirements apply according to State requirements.  The ACNC’s Governance Standards (for charities) may also apply.

Core Principles of Good Governance (Boards and Committees)

Strong governance is about leadership, accountability, transparency, and stewardship.A well-governed Board or Committee should ensure the organisation:

• Acts legally and ethically

• Has a clear purpose and strategy

• Manages risk and finances responsibly

• Maintains transparent decision-making and reporting

• Fosters a safe, inclusive and respectful culture

• Monitors board and top leader performance

• Manages conflicts of interest

Boards and Committees should have a process in place to assess their performance annually or bi-annually, review policies at regular intervals, maintain a board skills matrix to guide board membership requirements, undertake education sufficient to carry out their obligations, and evaluate top leader performance against agreed KPI’s.

According to best practice, it is advisable to have at least the following governance documents in place, approved, monitored and reviewed by the Board:

• Constitution (for incorporated associations)

• Board Charter/Terms of Reference

• Subcommittee Terms of Reference

• Strategic Plan

• Annual Operational Plan

• Client Services Charter

• Sponsorship & Funding Policy (NFP’s/Charities)

• CEO Recruitment & Performance Management Policy

• Enterprise Risk Management & Register

• Board Recruitment, Induction & Evaluation Policy

• Code of Conduct: Applicable to Board & staff

• Conflict of Interest Policy & Register

• Delegations of Authority & Register

• Financial Management Policy

• Work Health and Safety Policy

• *Privacy Policy

• **Whistleblower Policy:  Applies to organisations that meet two of these:  100+ employee, assets >25m or Revenue >50m

  
  

*Public Sector Agencies have specific Public Interest Disclosure Acts, which may also apply to organisations if identified as a bound contracted service provider which receives government funding. 

**While incorporated associations are legally not required to have a Whistleblower Protection Policy, larger Associations tend to adopt one voluntarily to demonstrate accountability and transparency.

iFreelance can assist in the development or review of the above governance documents.

Outside of these key governance policies, the Board/Committee delegates the creation and management of operational policies to the top leader.  The top leader is responsible for implementing and complying with the terms and conditions of established policies to achieve the governance requirements.

Boards should require periodic and ad hoc reports from senior leaders to support effective governance oversight. The top leader is expected to be proactive with regard to bringing relevant issues before the Board/Committee to enable them to meet their governance obligations.

It is important for there to be a clear understanding that the role of Board/Management Committee Chairperson is the designated role to oversee the operational head (i.e., MD/CEO/GM).  It is an impossible situation to have an operational head reporting into all members of the Board/Committee.

Regularly review of the performance of the top leader is vital for effective governance, fostering open communication, setting expectations, and addressing concerns early. Incorporating 360-degree reviews and feedback from staff and stakeholders; and/or workplace surveys provides a fuller picture of leadership effectiveness, helping to identify strengths and areas for development while supporting a culture of accountability and trust.

Importantly, these broader feedback mechanisms offer Boards/Committees additional visibility into organisational dynamics and performance, ensuring that insights and perspectives are gathered not just from the top leader but from across the workforce and stakeholder groups. This approach enables the Board/Committee to make more informed decisions and enhances transparency.

Board of Directors

A Board of Directors consists of individuals elected by shareholders or appointed by other Directors to be responsible for the performance and compliance of the organisation.  Those who sit on a Board are usually named Company Directors and are commonly Non-Executive Directors, although commonly the Managing Director may also sit on the Board.

The expectation for governance within a Board is often broader in scope than that of an Association, as Boards typically oversee more complex organisations with wider-ranging responsibilities and structures.  Whether a for-profit or not-for-profit (NFP), a Board is responsible for the sound and prudent governance of the organisation; ensuring the organisation is directed and controlled to meet legal and ethical requirements.

Directors duties are contained at Sections 180 – 184 of the Corporations Act 2001, as summarised below.

• Care and Diligence:  A Director must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would expect.

• Good faith and proper purpose:  A Director must exercise their powers and discharge their duties in good faith in the best interests of the corporation and for a proper purpose.

• Use of position:  A Director, Secretary or other Officer must not improperly use their position to gain an advantage for themselves or someone else, or cause detriment to the corporation.

• Use of information:  A Director, Secretary or other Officer must not improperly use information obtained because they are, or have been, a Director or Officer to gain an advantage for themselves or someone else; or cause detriment to the corporation.

Management Committee

In law, a Management Committee’s role is very similar to that of a Board; which is to govern, not manage day to day operations.  Committee Members are traditionally referred to as Members or Office Bearers.  Often the Chairperson is called a President.

The term ‘management committee’ comes from early incorporation status, when most community organisations were small and didn’t employ staff, and therefore the committee managed operations.  Over time, larger association began employing staff, and governance theory evolved to separate strategic oversight from management.

However, because incorporated Associations are often small and volunteer-run, members frequently become involved in operational tasks, leading to a misperception that they manage day to day affairs.  It’s simply a practical reality for many smaller NFP’s that committees often double as managers by necessity driven by funding restrictions. 

If a CEO/GM is hired but the Management Committee is regularly involved in daily operations, this commonly indicates unclear roles or unresolved leadership concerns. Such overlap breeds confusion erodes trust and reduces accountability. Clear separation of committee and executive duties is key, especially as more organisational resources lessen the need for committee involvement in operations.

Where a Management Committee does assist with operations, their role should be clearly defined. Even when taking on operational tasks, committees must always uphold legal and governance duties, manage conflicts of interest, and prevent personal interests from influencing decisions.

If we take the Associations Incorporation Act 1981 (QLD) as an example, the duties of members (referred to as ‘Officers’) are provided in Part 7, Division 3 as summarised below.

• Duty of care and diligence:  An Officer must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would expect.

• Duty to act in good faith:  An Officer must exercise their powers and discharge their duties in good faith in the best interests of the association and for a proper purpose.

• Use of position:  A person who is, or has been, an Officer must not improperly use their position to gain a material advantage for themselves or another person; or cause detriment to the Association.

• Use of information: A person who is, or has been, an Officer, and who obtains information because the person is, or has been, an Officer must not improperly use the information to gain a material advantage for themselves or another person; or cause detriment to the Association.

• Duty regarding insolvent trading (association): If the Association takes on a debt while it is insolvent or becomes insolvent because of that debt, and there were clear signs it was not solvent,  members can be held responsible for this.

Paying Directors and Members

Under the Work Health & Safety Act 2011 (WHS Act), both paid and unpaid board and committee members will meet the definition of ‘Officer’, as they hold decision-making authority for the Organisation. 

Under Corporations Law, if a Company is a special purpose company, paying Director fees may be an offence.  For a member on a Management Committee to be paid fees for services, this must be provided for in the Constitution.  Care must be taken to ensure that the private benefit of fees payment assists a NFP to achieve is purpose rather than simply for private gain of the individual. 

Specifically for NFP’s and charities, other regulations may also around such payments.  For example:

• For NFP’s and Charities, the ACNC’s position on remuneration is that it is permissible if it is in furtherance of the charity’s charitable purpose, permissible under its governing document and properly authorised by the Committee and is not unreasonable or unjustifiable.

• In NSW, the Charitable Fundraising Act 1991 prohibits member of a governing body from receiving remuneration for their role unless Ministerial approval is obtained.

Protecting “Officers” (as defined under the WHS Act) against Liabilities

The main protection for Officers is Directors & Officer (D&O) Insurance.  D&O Insurance provides direct cover for Directors and Members in relation to liabilities and legal costs arising from claims against them for wrongful acts committed in their roles.

Indemnities provided in an Organisation’s Constitution can offer protection for directors and members against certain liabilities incurred while performing their roles. However, it is important to understand the limitations of these indemnities. Specifically, indemnities cannot protect individuals against liabilities arising from breaches of duty or unlawful acts or omissions.

A breach of duty typically refers to failing to act with the required care, diligence, or honesty expected of the role. Examples include failing to act in the best interests of the Organisation, making decisions for improper purposes, or failing to disclose a material personal interest. Unlawful acts or omissions cover actions that contravene the law or regulatory requirements. This can include fraud, criminal conduct, trading while insolvent, or wilful misconduct. 

In short, indemnities are designed to protect against genuine mistakes or unintentional errors made in good faith, not deliberate or reckless misconduct.

Board Committee / Sub-Committee

A Board Committee/Sub-Committee is a group of individuals to whom the Board has delegated a specific role or purpose, often to build expertise and lessen the workload of the Board.  Common Board Committees include finance, risk and audit.

Generally made up of at least one Board, such committees can also have internal members (staff) and/or external members (subject matter experts).  These committees have limited authority, operating in accordance with established Terms of Reference. The Board retains ultimate responsibility for any actions made by these Committees.

Volunteer Insurance

According to the WHS Act, volunteers doing work for a ‘volunteer association’ are not deemed to be ‘workers’ and so are not covered by workers’ compensation insurance.   A Volunteer Association is an organised group of volunteers working together for a common purpose, which does not employ any paid workers.

Organisations must therefore ensure that it is covered for injury caused to volunteers.  Personal accident insurance covers volunteers for out of pocket medical expenses if injured whilst performing their work as non-paid volunteers.  Public liability and professional indemnity may cover activities (acts or omissions) of non-paid volunteers.

Disclaimer:  The information provided in this document is intended for general information only and does not constitute legal, financial or insurance advice. While the content draws on professional experience in human resources and safety and care has been taken to ensure the accuracy of the material, readers are encouraged to consider their

individual circumstances and seek appropriate professional advice for their specific situation. The reader should reach their own conclusions about the veracity of the information presented.

Prepared by Gina Clayton, Consultant and Owner of iFreelance.  Information sourced from legislation and other public sources.  Current as at time of publication.  Last reviewed October 2025.