Ko te amorangi ki mua, te hāpai ō ki muri

01/07/2018

These are difficult days in corporate and public sector governance.

Difficulties play out daily and impact anyone who works in or around the governance and management divide – very few organisations are unaffected.

The once smooth relationship between governors and senior executives is strained by unprecedented change.

This change plays out in ways that feel intrusive to managers – requests for more information, more evidence, more reporting, additional presentations and more meetings – all requiring time, effort and attention.

My headline advice to officials and board members is this: leadership to the fore; you all have important roles to play.

To officials, I say this: without question, balancing the interests of shareholders and the Board is difficult, especially in the public sector where monitoring agents demand more and more. While it can feel like monitoring agents want more and more control without any of the responsibility, a good executive has to keep in mind that shareholders and boards themselves are responding to the escalating demands to exercise unprecedented oversight in ways that sometimes blur the traditional distinctions between governance and management.

I offer this to board members new to public sector governance: public and private sector governance are broadly alike except in three ways.

• Firstly, private sector boards report to shareholders once a year, sometimes through quarterly reports or proactive disclosure to the market. In contrast, public sector boards report to activist shareholders, who may require weekly reporting (for some – not all). I will canvass the ‘no-surprises’ convention in a later blog post.
• Secondly, the governance team is usually focused on the bottom line in the private sector. Public sector governance differs from the private sector. The focus is on how well the organisation contributes to Crown-writ large. Said differently, public sector governance is concerned with the system of decision-making rights.
• Finally, in the public sector, you have to align and manage risk on behalf of the political and administrative executive. In contrast, risk management is much narrower in the private sector and often limited to anything that undermines the value being created for shareholders and customers.