This week the curtain goes up on radical new proposals for running the Abbey. But the National Theatre's Advisory Council must now vote itself out of existence, writes Fintan O'Toole

The radical new proposals for the governance of the Abbey Theatre which will be presented to its Advisory Council on Saturday strike a delicate balance between the need for accountability on the one hand and for independence on the other. They follow the recommendations of the KPMG report into the mishandling of the theatre's finances, by replacing the National Theatre Society Limited with a new company whose board will have the range of skills required for a 21st-century organisation. But they also answer the crucial questions about how that board should be chosen, quelling fears that the theatre might come under direct government control. If the Advisory Council accepts them, effectively dissolving itself in the process, the Abbey may finally have the structures that will allow it to be run effectively.

The Abbey's current structures arose out of its tangled history. When the National Theatre Society was established in 1904, it was inevitably as a private company: there was no Irish state for it to be the "national theatre" of. When the State was established, the clear intention of WB Yeats and Augusta Gregory was to hand the theatre over to the government.

In June 1924, they wrote to the President of the Executive Council, WT Cosgrave: "We now offer the Abbey Theatre, its entire contents, scenery and wardrobe and the property it owns to the Irish Nation . . . We resign our Directorship. It is for the Irish Government, should they accept our offer, to determine the method of carrying on our work."

The Abbey, they wrote, had become effectively a national theatre and therefore "should no longer be in the possession of private individuals, it should belong to the State".

The State, however, had other things on its mind, and didn't want to run the theatre. The compromise, which shaped the Abbey's future, was that the National Theatre Society would remain in control as a private limited company, but that the State would give it an annual subsidy.

Over time, extra pieces were bolted on to this compromise arrangement to meet new contingencies. The State's funding of the Abbey's new building in the 1960s led to an agreement that two government appointees would serve on the board. The development of partnership models led to agreements for staff representatives to join them. The National Theatre Society's shareholders, more recently re-organised as the Advisory Council, retained ownership and the right to nominate board members.

All of this led to the current structure of a nine-member board with four members appointed by the Advisory Council, two by the Minister for the Arts, one playwright, one representative of the technical and managerial staff, and one actor nominated by Equity. This structure has two obvious weaknesses. Board members tend to see themselves as representatives of the groups that appointed them, leading to internal tensions. And, as the KPMG report made clear, there is no guarantee that the mix of skills on the board will be that required to run an organisation with a multi-million euro annual turnover.

The current proposals, which have emerged from an extensive process of consultation between the Arts Council, the Abbey board and the office of the Minister, John O'Donoghue, try to address these weaknesses without making the Abbey a State-run institution. If they are accepted by the Advisory Council on Saturday, the National Theatre Society Limited will cease to exist. It will be replaced by the Abbey Theatre Limited.

The change is much more than a semantic one: a company limited by shares will be replaced by a company limited by guarantee. There will be no share capital and therefore no shareholders. The rather amorphous body which currently appoints almost half of the Abbey board will be no more.

This change has been widely anticipated, but what has not been clear is the mechanism for ensuring a broadly-based, accountable board while preserving the Abbey's independence.

A theatre company is not like the National Gallery or the National Concert Hall. It is a highly public, and at times politically controversial institution. A government-appointed board would be open both to political influence and to political blame, not just for the good governance of the institution, but also for the content of what happens on stage. The National Theatre would become a state theatre.

The proposals get around this problem by devising a structure that will be, if it is implemented, unique to the Abbey. The new board will still have nine members, but their appointment will be created through a radically altered process. The chair and two other members will be appointed by the Minister. But the other six - a substantial majority - will be put in place through what looks like a robustly independent process.

The key mechanism is the establishment of a Selection Committee, comprised of (a) the chair of the Abbey, (b) the chair of the Arts Council or another member of the Council nominated by the chair and (c) "an independent person of standing in the arts sector" nominated by the Minister for Arts.

In the first instance, this third person will be chosen from the current Advisory Council.

Each of these three people is, of course, ultimately a ministerial appointment, but there are significant guarantees against direct interference. The Selection Committee will have what looks a robust brief with transparent criteria governing its appointments to the board. One of those appointments will be a member of staff, chosen by the committee from a list of two elected by the staff itself. The other five will have to meet the needs for a "skills matrix" which includes contemporary theatre practice, Irish language and culture, business, financial and marketing expertise and legal, educational and industrial relations abilities.

The Selection Committee itself will also be charged with "maintaining the ongoing independence of the theatre" and providing an objective process of assessment of potential candidates for board positions. These explicit requirements are as strong as any guarantees of fair and open procedures can be. Like all such guarantees, they could be subverted by a cynical government, but they at least provide transparent criteria for public judgment of the operation of the new structures.

All of this is of course dependent on the willingness of the Advisory Council to emulate the old Irish parliament and vote itself out of existence. There are, however, both a stick and a carrot to be waved at the council when it meets on Saturday.

The stick is that the proposals represent a formidable consensus of government, Abbey board and Arts Council. Rejection would probably mean the collapse of the National Theatre Society on much more ignominious terms than those on offer, since there is no case for continued State funding of the Abbey without radical reform of its structures.

The carrot is an obvious sensitivity in the proposals both to the Abbey's need for independence and to the desire of many members of the current Advisory Council to continue to have some association with the theatre. One member of the Selection Committee will, in the short term at least, be chosen from their ranks. And those who wish to do so will become, under the proposals, "Honorary Associates" whose views on artistic matters will be heard by the director at least once a year.

If these assurances are enough for the Advisory Council and the proposals are accepted, the Abbey has much more to gain than a sensible governance structure. The fact that both the Government and the Arts Council have bought into an agreed new structure strongly implies that both are committed to helping the Abbey make the changes - including a new building - that are required for its second century. It would still be timely for the three parties to establish a public commission to teaseout what a national theatre should be in the Ireland of the 21st century, what such a theatre costs to run, and how it should be funded. If the reforms go through, there will at least be a future for the Abbey that is worth arguing about.

Who takes the lead at the Abbey

The current board
Four representatives of the Advisory Council

Two nominees of the Minister for the Arts

One staff representative

One actor, nominated by Equity

One playwright

The new structure
One chair and two directors nominated by the Minister

One staff member chosen by the Selection Committee from a list of two elected by staff

Five members chosen by the Selection Committee on the basis of an objective mix of desired skills