A GBE is legally separate from the Commonwealth. It is designed to foster private sector innovation and efficiency, although it does so to further government policy.
A GBE may either be:
- established as an entity under a specific Act of Parliament (a Corporate Commonwealth Entity), which does not have the same form as a company, but does have a separate legal personality or
- incorporated as a company under the Corporations Act 2001 (Corporations Act), whose shares are owned by the Commonwealth, acting through Shareholder Ministers (Commonwealth Company).
Whether constituted as a Corporate Commonwealth Entity or a Commonwealth Company, a GBE is subject to the Commonwealth governance and accountability frameworks under the PGPA Act and related instruments. GBEs are also generally subject to Parliamentary oversight.
GBE Role and Purpose
The reasons for creating a GBE are usually linked to implementing government policy, where intervention was deemed appropriate due to:
- high barriers to entry
- market failure or no market at all
- infrastructure investments with lower rates of return and/or
- other policy considerations of Government.
The ‘purpose’ of a GBE will fundamentally inform the decisions made by its Board and Directors which must also have regard to financial sustainability and enhancing shareholder value.
Purpose could be conveyed in a number of different ways:
- in the constitution of a Commonwealth Company
- in the legislation establishing a Corporate Commonwealth Entity (Enabling Legislation)
- in formal notices issued by Shareholder Ministers from time to time
- in the letter of appointment of Directors
- in the statement of expectations from Shareholder Ministers and Commercial Freedoms Framework and
- as part of the corporate planning process undertaken by GBEs.
Purpose should be a key driver of the strategic plan for a GBE and may change over time in respect to changes in government policy.
Due to the higher levels of scrutiny, sensitivity and accountability, factors that influence a GBE's decision making are broader than for a private sector organisation.
Key differences between a GBE and a private sector company include:
- enhanced reporting and disclosure to Shareholder Ministers
- formal planning obligations, including as part of the annual budget cycle
- the application of the Public Interest Disclosure Act 2013
- in some cases;
- the requirement to deliver Community Service Obligations to certain service quality standards an
- application of the Freedom of Information Act 1982
- appearance at Senate Estimates hearings.
Depending on its structure, a GBE may also be subject to some or all of the accountability requirements that apply to a private sector company, including those specified in the Corporations Act.
However, all GBEs are subject to additional governance and accountability requirements under the PGPA Act and other legislation and related instruments, as well as issued guidelines such as the Commonwealth GBE governance and oversight guidelines (RMG-126).
The Commonwealth frameworks that apply to the governance, reporting, financial stewardship and accountability arrangements for GBEs facilitate shareholder oversight and ensure that GBEs are managed in a way that:
- meets the Government’s policy objectives effectively
- builds shareholder value and ensures the ongoing financial sustainability of the business
- utilises resources in an efficient, effective, economical and ethical manner
- balances management autonomy with regular reporting of performance and shareholder accountability and
- demonstrates similar efficiency, transparency and accountability as good practice private enterprises.
GBE Shareholder Ministers and their Departments
The Commonwealth’s ownership interest in a GBE is represented by Shareholder Ministers, generally the Minister for Finance and the Portfolio Minister in which the GBE sits, or solely the Minister for Finance in some circumstances.
The Shareholder Ministers have a role in the governance of a GBE, engaging on strategic issues and setting clear objectives for the GBE in accordance with their accountability to the Parliament and the public.
GBEs can be engaged in areas of policy which attract significant public interest and Shareholder Ministers will often be called on to respond to queries, including those from the media. Shareholder Minister information requirements therefore need to take account of these.
Each Shareholder Minister is supported by one or more departments which provide expert advice on government policy formulation and are often responsible for implementing and administering the policy of the Government of the day.
The Shareholder Ministers’ departments play an important role in providing advice to Shareholder Ministers on both GBE strategic issues and operational performance.
It is common for departments to allocate specific officials as liaison officers, to gain a detailed understanding of a GBE in order to facilitate timely information flow and advice.
Shareholder Ministers will be briefed on a regular basis by their departments on how the GBE is performing and whether it is meeting the Minister’s expectations and its purpose by:
- analysing and commenting on the GBE’s various reporting, including its Corporate Plan and
- monitoring the GBE's adherence to its purpose and as appropriate, its legislative obligations and/or statement of corporate intent.
Good governance is essential to ensure that GBEs continue to make a positive contribution to economic efficiency, competitiveness and the delivery of services to the community and Government.
The Board of Directors provides stewardship, strategic leadership, governance and oversight, while also acting as a bridge between Commonwealth policy-making and operational implementation by the GBE.
The Board of Directors are accountable to Shareholder Ministers for:
- governance and reporting
- promoting accountability for Government resources and
- ensuring sound financial management and operation by the GBE.
The Board of Directors is responsible for developing business strategies that enable the GBE to implement government policy. As such, Directors are obliged to take Shareholder Minister views into consideration on strategic issues and discretion may be limited by the purpose set for the GBE.