He tangata kī tahi and public sector governance

29/4/2018

In Aotearoa, public sector governance refers to the system by which over 4,000 public entities, including policy ministries, departments, Crown entities, state-owned enterprises (SOEs), and sui generis organisations such as the Reserve Bank of New Zealand, are directed and controlled.

The system includes all processes and behaviours that enable decision-makers to lead and guide public entities in line with the priorities of the Government of the day, mindful that there will be a future Government.

The goal of the system is to make the best possible decisions.

Good decisions enable an organisation to deliver the specific value the Government seeks to offer New Zealanders.

Thus, public sector governance includes everything that allows an entity to set its direction, implement the path in pursuit of agreed outcomes while fulfilling its accountability obligations.

This, in turn, means the actors include: shareholding Ministers and their ownership advisors, policy Ministers and their purchase officials, central agencies and the functional leads, sector partners and industry stakeholders, and the chief executive of the entity and their senior team.

Good board secretaries are constantly calibrating and regulating their Board’s decision-making rights relative to other parts of the system, and often, only with the permission of the various other actors described above.

Six other factors make governance in the public sector more challenging and quite different from corporate governance in the private sector.

First, board secretaries in public entities must manage their public decision-making rights relative to other statutory officers; for example, DHB boards exercise their decisions relative to the regulatory decisions of chief medical officers. This is a nuanced balancing act.

Second, almost all public entities are statutory bodies required to operate within a legal framework. That means board secretaries are advising on the state sector, crown entities, state-owned enterprises and public finance legislation, as well as the institutions founding/enabling legislation permits; for example, the board secretary for ACC must know the central agency legislation inside out, while also being expert in the Accident Compensation Act. This means board secretaries must understand what the statutory framework authorises.

Third, company secretaries, especially in the state-owned enterprise sector and the company secretaries advising boards in the State services, must be comfortable with the likelihood of conflicting objectives – profit or public good, risk or return. Good board secretaries are comfortable with complexity and paradox.

Fourth, board members can be elected, appointed, or both. This creates capability issues and mixed obligations to one or more constituencies. A good board secretary helps a chair navigate those issues and can be a sounding board for new board members and directors. An outstanding board secretary will know where individuals can get guidance, coaching, and mentoring to be a positive influence at the top table.

Fifth, there are understandably higher expectations of accountability and transparency for those using public resources, meaning board secretaries must help board members and company directors in the public sector operate with integrity as they are in the public eye. Good board secretaries are the chief
integrity officers for their boards; and

Finally, unlike the corporate sector, public entities are subject to stricter expectations and rules for conflicts of interest. Board secretaries must help board members proactively manage any perception of a conflict.

The following blog post will cover how many board and company secretary roles there are in the New Zealand public sector.