Health and Social Care Bill 2011 – Does government understand governance?

In relation to the ‘governance and management’ of NHS foundation trusts, the newly published Health and Social care Bill 2011 states, at para. 136, that ‘boards of governors’ should be termed ‘council of governors. This is appropriate since the true governing body of an NHS foundation trust is the board and directors, and having two ‘boards’ can cause confusion. The council of governors is more akin to a ‘shareholder’s council’ in the commercial sector and is there to represent the ‘owners’ of the foundation trust (i.e. the ‘members’) and is not, therefore, a governing body as such – although it is a key component of the overall governance of a foundation trust.

However, interestingly, para. 136 also states that “The general duties of the council of governors are—
(a) to hold the non-executive directors individually and collectively to account for the performance of the board of directors, and
(b) to represent the interests of the members of the corporation as a whole and the interests of the public”

Representing members is exactly what the council of governors should be concerned with, but ‘holding the non-executive directors individually and collectively to account for the performance of the board of directors’  defies good governance logic. The board of directors is collectively responsible for the governance of the organisation and should, therefore, be collectively held to account. To single out only part of the board as being accountable for the whole board’s performance is bizarre!

As Professor Bob Garratt, leading international corporate governance expert says “Government doesn’t understand governance.”

5 Responses to Health and Social Care Bill 2011 – Does government understand governance?

  1. Richard Gudoi says:

    Hi all,
    I find this an interesting question. This is we say you cant eat own words, one must walk the talk. Thus to say the following:
    Governments enacts company laws and public laws including those of professions.

    Governments does so as to firstly make sure that private sector manages its affairs well so as to attract reasonable taxable income to enable government meet its national budget.
    Government supervisors the private sector through tax returns and supervsory agencies like revenue services authority.
    Government will have to enact different laws for public institutions so they can transparently account to the citizens through parliamentary commissions or committees.
    Government unlike private sector is the sole unilateral owner of public entities activites and plans, Government appoints supervisory ministries, committees of parliament, appoints CEOs and Boards.
    Government expects these public entities to run objectively according to their national manadate plus a political agenda that should be met.
    This means that sometimes it does not understand the best tenets of corporate governance.

    Yes generally government understands corporate governance and management but public sector is set up on a public domain to answer issues of populations demands like employment, electricity prices,food prices control etc.
    While this is so, there are challenges found in administering corporate governance and best management practices due to lack of skilled board members,lack of good plan to be followed in appointing these board members, moreover they are faced with the challenges of accounting transparently to the nation,the public. The government agenda if anything should be geared to managing government entities in a business like manner equal to private sector if not more. By doing this ,it shall harness best results of well managed public entities. There fore the issue of ownership relationship with the board, ownership relationship with the Agent thus the CEO and Board relationship with the CEO , CEO vs Board,vs Other stakeholders will pause a great challenge that government faces in honouring the mandate of citizens. This is the major problem emanating from ownership conflicts. This is the area of serious research to be studied. It is even worse in third world governments where the status quo remains coupled with fraud and corruption. The ignorance of the entire boards not to understand their roles in thrid world arena goes with poor skills hence they all become loyal to a political agenda . This makes it for the government not to understand management.

    There are many issues to talk about but more is needed from another angle to make this submission properly debated to find a reasonable answer.

  2. Richard Gudoi says:

    Therefore to continue,the blame that the general duties of the council should among others answer for the entire Board of directors or governors is jsut a hypothetical gimmick that cannot even be attested in courts of law.It would face strong challenges.

    It is therefore best practice to observe best corporate governance guidelines llike it is in private sector. The issue is that corporate governance is a voluntary affair . It therefore requires a corporate governance professional body established to manage the ethical climate including examinations and practice for one to be a member of the board of any entity.
    If the law should state that all people appointed on any corporate board should be firstly skilled,next educated, can ably communicate, understands business, is apolitical,understands risks,knows corporate social responsibility, asks the right questions in the boardroom, and can strategically represent the shareholder,stake holders, promote asset growth,empower workers positive morale evolution and manage or increase employment and oversee business continuity.

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