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Education Law Articles - Governance

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The Principal and the Board:  An essential governance dynamic

The relationship between the principal and the board is crucial to any school’s success. An effective relationship is the foundation upon which good governance and management is built. Neither the board nor the principal can function properly where their relationship breaks down.

This paper by David Ford aims to assist in keeping the vital relationship between the principal and the board thriving - enjoy!

Request your copy of The Principal and the Board:  An essential Governance Dynamic

Workplace Policies:  Good and Bad

Good governance is often said to involve the governing body adopting policies on a range of topics. Principals also typically have numerous workplace policies for school staff to follow. This is all well and good … but there can be a sting in the tail.

The recent decision of the Full Court of the Federal Court of Australia in Romero v Farstad Shipping (Indian Pacific) Pty Ltd illustrates that employers should exercise care in how they prepare and promote their workplace policies. In this case, the Court found that Farstad’sWorkplace Harassment and Discrimination Policy incorporated additional mutual obligations into the contract of employment, which Farstad had failed to comply with in carrying out an investigation into workplace bullying and discrimination. The Court looked not only at the language of the Policy but also at the surrounding circumstances, such as the way that it was promoted and reinforced to employees, and the fact that it was signed by employees. 

This decision illustrates that great care should be taken in the drafting of workplace policies, as employers might be in breach of the contract of employment if they fail to comply with any additional requirements imposed by a workplace policy. Employers should ensure that their workplace policies are up to date, be aware of any obligations under them and ensure that they comply with any processes required by them. 

Questions about workplace policies?  Contact us.

Strengthening Board Performance

At the Building Better Boards conference in Sydney, Dr Tom Holland of the University of Georgia spoke of the importance of ongoing Board Education. His research shows that the most effective Boards spend time at each meeting and extra time each year evaluating their performance and improving their governance skills. John Littleford also advises Boards “to take time out at least once a year to focus on the principles of healthy board governance.” For help in improving your Board's performance, contact David Ford. He has assisted many School Boards as well as others in the non-profit sector to review their governance model in the context of the legal framework operating in Australia. 

Material Personal Interest

A trustee of a Texas community college recommended investment of US$2 million in a "factoring" business. The trustee held 49% of the factoring business but did not disclose his involvement. The factoring business went bankrupt. What would the position be here?

The business judgment rule would not save an Australian director as the man clearly had a material personal interest in the judgment being made. The man would also have contravened the provision in the Corporations Law which obliges a director with a material personal interest to give the other directors notice of it. 

School Councillors Benefit from New Business Judgment Rule

Many independent schools and their school foundations are companies governed by the Corporations Law. The provisions of the Law dealing with the duties and powers of directors (that is, school councillors and the board members of foundations) were changed earlier this year.

Directors must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
$were a director in the company's circumstances; and
$occupied the office held by, and had the same responsibilities within the company as, the director.

The Courts have over the years given some indication of what is required of a director to meet the standard of care and diligence which a reasonable person would exercise in the relevant circumstances:

  • directors are expected to be capable of understanding the company's affairs to the extent of actually reaching a reasonably informed opinion of its financial capacity;
  • directors need not exhibit a greater degree of skill in the performance of their duties than may reasonably be expected for a person of their knowledge and experience;
  • it is relevant to consider the way in which the work of the company is distributed between its directors and other officers, provided that distribution is reasonable;
  • the experience or skills that the Director held himself or herself out to have in support of appointment to the Board is relevant;
  • directors are under a continuing obligation to keep themselves informed about the activities of the company;
  • directors should undertake a regular review of the company's financial statements and must make further enquiry arising from that review where necessary;
  • directors should meet as a Board as often as they consider necessary to carry out their functions properly. 

Directors are taken to have met these requirements when making a business judgment (that is, a judgment about matters relevant to the school's business operations) if,

  • they make the judgement in good faith for a proper purpose; and
  • they do not have a material personal interest in the subject matter of the judgment; and
  • they inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and
  • they rationally believe that the judgment is in the best interests of the school.  

A belief that the judgment is in the best interests of the school is a rational one unless the belief is one that no reasonable person in the director's position would hold.

Question about Governance?
Contact +61 2 9267 9800


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