Delegating board powers
Delegating is a process of giving a task, authority or responsibility to another person. It helps you spread a workload to help get things done more efficiently.
A person who is authorised to use the powers on behalf of the board of directors is a delegate.
To delegate authority:
- you must have the power to delegate whatever you are delegating (follow the law and your rule book)
- the delegation of authority must be written down and communicated to relevant stakeholders (the board must be transparent)
- delegates must only use the power in the best interests of the corporation, within the limits of their authorisation, and use of delegations are checked and monitored by the board (delegates must be accountable).
What can a board delegate and to whom
Unless the corporation’s rule book says otherwise, a board (not individual directors) can make a resolution to delegate any of their powers to:
- a committee of directors
- a director
- an employee of the corporation
- any other person.
What a board cannot delegate
Some powers and responsibilities of directors cannot be delegated. Directors cannot delegate their responsibility for:
- the delegate's use of the board's delegated power or authority
- having a good understanding of what the corporation does
- monitoring and keeping up knowledge of the corporation's operations and performance
- understanding the corporation's financial position to ensure it has enough money to pay its bills when they are due
- approving the corporation's annual general report, financial report and directors' report
- using their own mind to review information or advice to make a decision – directors must not simply accept the views of others (including professional or expert advisors)
- engaging with management to get the information they need to make informed decisions on behalf of the corporation – directors must not expect management to automatically inform them about corporation matters
- liability for certain corporation debts such as tax debts for GST, PAYG or superannuation
- delegating board powers or authority.
Examples of board delegations
- Delegations may be general such as granting a chief executive officer overall authority to manage the corporation's operations including hiring and firing staff, and making operational decisions.
- Delegations may be for specific tasks or decisions, usually with defined limits and conditions:
- Authorising a corporation employee or other person to lodge corporation forms or reports with ORIC
- Authorising corporation employees in certain roles or levels to perform financial transactions up to a certain dollar amount.
Risk for directors
The board can delegate their power and authority but never liability. The board is still legally responsible for the decisions or actions of delegates as if the board did the act themselves.
The board remains responsible to members, employees, stakeholders, regulators for any failure in the corporation's performance arising from the actions of a delegate.
Setting limits and internal controls can help a board manage the risk.
Obligations for the delegate
When exercising delegated powers, the delegate must:
- follow any directions, conditions or limitations of the directors
- act in the best interests of the corporation, in line with the CATSI Act, corporation's rule book and policies
- not use the delegation in any situation that creates a conflict of interests.
Record keeping and accountability
Directors must record the resolution to delegate their powers or authority in the minutes of the directors’ meeting. The resolution should make it clear what powers are being delegated, to whom and the date the delegation starts and ends.
The board's decision to delegate its powers or authority must be recorded in the corporation's minute book.
It’s a good idea to keep track of delegations by putting them in a register or other document that everyone in the corporation can access and follow.
In line with their duty of care to the corporation, they directors have a duty to monitor the use of their delegated powers. The board can monitor how their delegation is being used by asking for a report on use of delegated powers by delegates.
Tips for delegating effectively
- Have a delegation policy with a schedule of delegations – try this example delegation policy from the Institute of Community Directors Australia
- Establish a system for tracking compliance and reporting regularly to the board
- Ensure the corporation has a risk management framework to identify and address breaches
- Keep directors informed about their responsibilities and liabilities for delegated powers
Related
- Delegating authority to lodge forms and reports with ORIC including an example template for the board to use.
- Delegating authority to an alternate director
Templates: Record of directors' delegation of powers
The document contains 2 example templates:
- Delegation of directors’ powers (blank for you to specify what powers are delegated)
- Delegation of directors’ powers to lodge forms and reports with ORIC