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Tim HouwelingTim Houweling • 2ndPremium • 2nd Barrister & Solicitor: Litigation.Barrister & Solicitor: Litigation. 3d • 3 days ago • Visible to anyone on or off LinkedIn

Corporate Governance Lessons Every Councillor Should Know

The recent Federal Court decision Australian Securities and Investments Commission v Bekier explored governance questions that also provides powerful guidance for councillors. Most people assume the governance responsibilities of corporate directors and local government councillors are fundamentally different. In reality, they are remarkably similar.

Under the Local Government Act 1995 (WA), together with the Local Government (Rules of Conduct) Regulations 2007 (WA), councillors must:
• act with reasonable care and diligence
• act with honesty and integrity
• make decisions based on relevant and factually correct information

These duties mirror the obligations imposed on corporate directors under the Corporations Act 2001 (Cth).

Here are seven governance lessons from that decision that apply directly to local government.

1. Governance Is About Risk Oversight

Boards exist to oversee risk. Councils perform the same function.

Councillors must ensure that risks involving procurement, financial management, regulatory compliance, and infrastructure projects are properly identified and managed. Ignoring or failing to escalate risks undermines good governance.

2. The Legal Standard Is Objective

Both directors and councillors are judged against an objective standard. The question is not what the decision-maker believed.

3. Decision-Makers Must Be Properly Informed

Justice Lee emphasised that directors must take a “diligent and intelligent interest” in the information before them. Councillors must do the same.

4. Red Flags Require Questions

When warning signs appear, decision-makers must investigate. If councillors identify issues such as unusual procurement arrangements, unexplained financial variances, or inconsistent planning recommendations, they must ask questions.

5. Councillors Govern — The Administration Manages

The Local Government Act 1995 (WA) establishes a clear separation between governance and administration.

6. Information Overload Is Not an Excuse

Board packs in the Bekier case exceeded hundreds of pages. The court rejected the argument that directors could not reasonably absorb the information.

The same applies in local government.

7. New Councillors Assume Full Responsibilities Immediately

Newly appointed directors cannot claim they are “still learning”. Neither can newly elected councillors.

Good governance principles are universal.

Whether applied to corporations or local governments, effective governance requires decision-makers to:
• understand organisational risks
• engage with information
• ask questions when concerns arise
• exercise independent judgment
• respect the separation between governance and management

Councillors are statutory decision-makers responsible for the stewardship of public resources, not just mouth pieces for a segment of the community.