Corporate governance and the third sector

The current global financial crisis has further increased the need for careful governance, which has particular significance for not-for-profit organisations.

Largely unheard of even into the 90s, the concept of corporate governance has become more widely recognised over the years as corporate accountability has shifted from a relatively inert existence to an essential requirement, having been crystallised by such economic trends as the extravagant expenditure of the 80s and the dot com disasters – particularly prevalent in the USA.

Though the term ‘corporate governance’ is largely thought of as a concept relating to legal structures and financial accounting, it also extends into other corporate areas such as health, safety, environment issues, and integrity, where practice, procedures and systems have been developed. Guidelines such as Australian Standards, ISO, Total Quality Management and various ‘best practice’ procedures now all fall under the recognised ‘Governance’ label, and the majority of business is conducted through a ‘corporate structure’.

Not-for-profit sector
The corporate structure has also been largely embraced by the broad not-for-profit (NFP) sector – from charities to religious organisations, sporting clubs to business interest groups. More sophisticated organisations, and those with a substantial financial base, were incorporated – registered and certified as legal corporations – according to the ‘Corporations or Companies Act’ (now the Corporations Act).

Many NFPs, however, were also incorporated according to the less onerous protocols of the relevant State ‘Associations Incorporations Act’. Some charities are created as Trusts, often with a Corporate Trustee, and still fewer are incorporated by specific, private acts of Parliament.

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