STATE SECTOR GOVERNANCE ESSENTIALS - KĀINGA ORA GOVERNANCE CAPABILITY UPLIFT PROGRAMME - WORKBOOK - IOD NZ
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State Sector
Governance Essentials –
Kāinga Ora Governance
Capability Uplift
Programme
Workbook
iod.org.nz
Workbook This workbook has been prepared as a resource for participants in the Institute of Directors in New Zealand (Inc) Director Development programme. It is not intended to be exhaustive or constitute advice. Its content should not be used or relied upon as a substitute for proper professional advice or as a basis for formulating business decisions. The Institute of Directors in New Zealand (Inc) and its employees expressly disclaim all or any liability or responsibility to any person in respect of this workbook and in respect of anything done or omitted to be done by any person in reliance on all or any part of the contents of the workbook. (March 2021)
State Sector Governance Essentials – Kāinga Ora Governance Capability Uplift Programme Workbook
Table of contents Introduction from the Institute of Directors 5 The Chatham House Rule 6 The IoD Code of Practice for Directors 7 Introduction 8 Governance 10 Governance in the state sector 13 State Sector Act Reform 14 Board appointments 20 Office of the Auditor-General (OAG) 21 Four Pillars of Governance Best Practice 22 Summary 23 Presentation slides 24
4 Institute of Directors State Sector Governance Essentials | Workbook
Facilitator
Pania Gray is a former public servant. She began her career at Te Puni
Kōkiri in the mid 1990s in policy roles. After a brief secondment to the
newly established Ministry of Justice in 1996, she later led the statutory
monitoring function for Te Puni Kōkiri. This experience took her to
the Office of the Auditor-General (OAG) where, as Sector Manager:
Education, Science and Māori Affairs, she held responsibility for working
with Parliamentary Select Committees, Board Chairs, Chief Executives
and Appointed Auditors. In this role she led several high-profile education
sector OAG inquiries that examined governance failures. She then
established her own practice, Kororā Consulting, in 2010 and continues
Pania Gray, to carry out a range of consulting work in the public, private and not-for-
CMInstD profit sectors.
Among other work in the justice sector she is a specialist advisor in Crown
and iwi arbitration.
Alongside her career experience, Pania has a strong mix of not-for-
profit, public entity and for-profit governance experience. Pania is a
current Ministerial appointee serving on the NZ Film Commission, an
autonomous Crown entity. She also currently holds two commercial
governance positions for businesses in the education sector and has
additional governance and audit and risk committee experience. She has
been partnering with the Institute of Directors as a governance lead and
facilitator since 2016.
Pania holds a Bachelor of Commerce and Bachelor of Arts degrees in
Commercial Law, Economic History, Māori studies and Criminology. She
was awarded First Class Honours in Criminology at Victoria University.
Institute of Directors State Sector Governance Essentials | Workbook 5 Introduction from the Institute of Directors The Institute of Directors (IoD) promotes excellence in corporate governance, represents directors’ interests and facilitates their professional development through education and training. The IoD is a membership organisation of over 9,000 individuals on the pulse of governance in every industry. Connecting, equipping and inspiring The IoD connects, equips and inspires directors through thought leadership and our extensive network, professional governance courses, events and resources. Continuous professional development It is critical that today’s directors are informed, connected and armed to meet the modern challenges of directorship. As we face disruption, organisations must operate at a new pace, constantly reinventing and looking for opportunities in a dynamic environment. Good directors know the value of continuous professional development, the essence of enabling them to keep pace with change. The IoD offers a suite of governance training to equip you with the tools to perform in your role at each stage of your development as a director. These courses balance technical content with real-life experience stories from facilitators who are subject matter experts and also experienced directors. For more information about the Institute of Directors – go to iod.org.nz
6 Institute of Directors State Sector Governance Essentials | Workbook
The Chatham
House Rule
Courses held by the Institute of Directors are conducted under the
Chatham House Rule.
The Rule reads as follows:
When a meeting, or part thereof, is held under the Chatham House Rule,
participants are free to use the information received, but neither the identity
nor the affiliation of the speaker(s), nor that of any other participant, may be
revealed (Royal Institute of International Affairs, 2014).
Historical background
The Chatham House Rule originated at the Royal Institute of International
Affairs (IIA) in the United Kingdom. The IIA is a policy-based entity dedicated
to research and public promotion of international affairs. According to the IIA,
the Chatham House Rule was created in 1927.
The Institute is situated in Chatham House, a building in the heart of London,
which was a British prime ministerial residence in the 18th century. The
name of the house is attributed to its first resident, William Pitt the Elder,
Earl of Chatham.
What is the Chatham House Rule?
The Chatham House Rule is a convention used to promote open and informed
dialogue in meetings. When meetings are held pursuant to the Chatham House
Rule, the discussion is strictly private.
Participation in a Chatham House discussion is kept confidential and the
names of attendees may not be published. However, should an individual
wish to repeat their own contribution to a Chatham House discussion they are
permitted to do so.
For more information go to
chathamhouse.org/about-us/chathamhouserule
Institute of Directors State Sector Governance Essentials | Workbook 7 The IoD Code of Practice for Directors This Code provides guidance to directors to assist them in carrying out their duties and responsibilities in accordance with the highest professional standards. For a copy of the code, go to iod.org.nz/About-us/Founding-documents
8 Institute of Directors State Sector Governance Essentials | Workbook
Introduction
Welcome to State Sector Governance Essentials. This full-day course is part
of the Kāinga Ora Governance Capability Uplift Programme and is designed to
support you in your leadership role at Kāinga Ora.
The purpose of this course is to develop your governance capability including
insights into governance within the state sector. You will gain an awareness of
the responsibilities and challenges of being in a state sector governance role.
There are significant differences between a governance role in a private
organisation and a governance role in a state sector entity, although the
principles of good governance stay the same.
Effective governance in the state sector requires a solid understanding
of the processes and drivers inside the state sector in order to add value
in a governance role.
The learning objectives for this course:
• xamine the opportunities for supporting effective governance in the
E
state sector.
• ain an enhanced understanding of how state sector governance operates
G
and the characteristics of ‘good’ governance in the state sector.
• nderstand the Four Pillars of Good Governance and identify key board
U
and committee governance responsibilities.
• Gain insights into the challenges of being in a state sector governance role.
• articipate as a cohort of leaders supporting and enhancing individual
P
and group understanding of good governance.Institute of Directors State Sector Governance Essentials | Workbook 9
The State Sector
The state sector is the broad range of organisations that serve as instruments
of the Crown in respect of the government of New Zealand:
• Public service departments, eg service delivery and monitoring.
• State-owned enterprises.
• Crown entities.
State sector entities can have many different roles and functions:
• Funding agencies.
• Operational entities.
• Regulatory bodies.
Key resources
• abinet Manual 2017
C
dpmc.govt.nz
• tatutory Crown Entities
S
A Guide for Ministers, June 2014
publicservice.govt.nz
• oard Appointment and Induction Guidelines
B
Updated October 2015
publicservice.govt.nz
• ode of Conduct for Standards of Integrity
C
publicservice.govt.nz/assets/Legacy/resources/Code-of-conduct-
StateServices.pdf
Additional resources have been provided in your table pack.10 Institute of Directors State Sector Governance Essentials | Workbook
Governance
What is governance?
There is no single definition of governance, but all definitions have common
themes. Sir Adrian Cadbury was a leader in raising awareness of, and
stimulating debate on, corporate governance. He is noted for developing
the Cadbury Code, a best-practice governance code that was the basis for
corporate governance reform around the world. There are many definitions
of corporate governance:
“The system by which companies are directed and controlled.”
Cadbury Code, 1992
“Involves a set of relationships between a company’s management,
its board, its shareholders and other stakeholders. Corporate
governance also provides the structure through which the objectives
of the company are set, and the means of attaining those objectives
and monitoring performance are determined.”
G20/OECD, 2015
“Corporate governance comprises the principles, practices
and processes that determine how a company or other entity
is directed and controlled.”
FMA Principles and Guidelines 2018
Governance exists to add value by ensuring the organisation achieves its
purpose, as articulated and subscribed to by its owners (or members).
The purpose may be for shareholder return, public good or member benefit.
Quality governance includes understanding the environment in which the entity
operates. Each entity has a specific operating environment. The board must
work to balance the legitimate interests of shareholders and stakeholders and
the best interests of the entity. There may be situations where board members
also work in the organisation performing a management or operational role.
For example, a family-owned farming business often involves family members
managing the farm operations as well as performing a governance role at the
board table. What are the unique challenges that this situation creates?
Good governance is underpinned by values of responsibility, accountability,
fairness and transparency. It involves strategic oversight of business operations.
Key features are monitoring and measuring performance and compliance, and
ensuring the integrity of financial reporting systems. High-performing directors
aim beyond compliance and aspire to a best-practice approach.Institute of Directors State Sector Governance Essentials | Workbook 11
The benefits of governance
Good governance increases the likelihood that the entity will survive and fulfil
its purpose. It makes good business sense because it builds and sustains
stakeholder confidence, improves operational performance and reduces risk.
The board, as a key agent of good governance, adds value when its actions help
to achieve the entity’s purpose.
Research has proven that the advantages of governance include:
• providing leadership
• keeping senior management focused
• furthering achievements and likelihood of survival
• providing credibility, transparency and accountability
• improving stakeholder confidence
• ensuring stakeholder interests and relationships are managed
• achieving better risk management.
Governance codes of practice
Governance codes vary around the globe. The governance framework in
New Zealand is heavily influenced by the principles-based United Kingdom
approach, where shareholder interests ultimately underpin the governance
process and structure. The principles-based governance framework
requires a contextual and balanced approach. It does not provide black and
white answers.
At the same time, much influential international public policy and thought
is based on Scandinavian models where governance, broadly speaking,
is stakeholder aligned. Governance codes supplement the legal framework
and provide practical guidance.
Established codes referred to in New Zealand include:
• IoD’s Code of Practice for Directors
• inancial Markets Authority (FMA) Corporate Governance in New Zealand
F
– Principles and guidelines (2018)
• NZX Corporate Governance Best Practice Code (2019).
Codes of practice are an important source of both useful, practical guidelines
and requirements for directors.12 Institute of Directors State Sector Governance Essentials | Workbook
Distinguishing governance from management
The board and management have different roles that require different skills.
Governance
• sets the direction to achieve the purpose
• provides a framework by which an organisation will operate
• provides a longer-term focus
• holds management to account
• ensures compliance.
Management
• executes board-approved strategy
• works to the business plan
• has a day-to-day operational focus.
Usually, a board operates at the strategic level and management at the
operational level.
Strategic thinking Operational thinking
Longer-term Immediate term
Conceptual Concrete
Reflective learning Action/doing
Identification of key issues/
Resolution of existing problems
opportunities
Hands-off approach Hands-on approach
Helicopter perspective On-the-ground perspective
Context will impact the duties the board will perform. While directors may
delegate to management, they are ultimately responsible. For example, a new
and unproven CEO may warrant tighter board scrutiny and support, which will
loosen as the board gains confidence in the CEO.Institute of Directors State Sector Governance Essentials | Workbook 13 Governance in the state sector Modern public sector governance is a key outcome of large-scale reforms begun in the 1980s as a result of government pursuit of public sector deregulation. Governance of state sector entities with appointed boards generally operates under an ‘arms-length’ model through a number of acts that are relevant to directors in the state sector governance setting. Government owns (and may fund, in full or in part) the entities and appoints their governing boards. The Government makes around 2,500 appointments to statutory boards and committees each year, including appointing the boards of State-Owned Enterprises (SOEs), Crown entities and other Crown-owned companies (we focus on these entities in this section). Special legislation and compliance In addition to general legislation in the governance legal framework, a number of acts are relevant to directors in the public sector governance setting. Other than entity specific (eg establishing) legislation, key acts include the: • Public Service Act 2020 (replaces the State Sector Act 1988) • Public Finance Act 1989 • State-Owned Enterprises Act 1986 • Crown Entities Act 2004 • Crown Research Institutes Act 1992 • Official Information Act 1982 • Public Records Act 2005.
14 Institute of Directors State Sector Governance Essentials | Workbook
State Sector
Act reform
The government announced major reforms to the State Sector Act in 2019. With
the passing of the Public Service Bill on 23 July 2020, the State Sector Act 1988
has now been repeated and replaced with a new Public Service Act 2020.
The Public Service Act came into force on 7 August 2020.
Key features of the new Act are that it:
• rovides a more flexible set of options for how the public service can
p
organise itself to better respond to specific priorities
• allows public servants to move between agencies more easily
• learly establishes the purpose, principles and values of an apolitical public
c
service, as well as its role in government formation
• supports the Crown in its commitment to and its relationship with Māori
• trengthens leadership across the public service and, in particular, provides
s
for system and future focused leadership
• hifts the focus from state services to public services, changing the name of
s
the State Services Commission to the Public Service Commission.
The Act also articulates the purpose, principles, values and spirit of service that
characterise the public service, and the role of the public service in supporting
the Crown in its relationships with Māori under the Treaty of Waitangi.
Chief executives of departments have a number of statutory leadership
responsibilities, some of which have been reframed from the previous law.
They include:
• eveloping and maintaining the capability of the public service to engage
d
with Māori and to understand Māori perspectives
• upporting their Minister to act as a good steward of the public interest,
s
including by
• maintaining public institutions, assets, and liabilities
• maintaining the currency of any legislation administered
by their agency
• providing advice on the long-term implications of policies.Institute of Directors State Sector Governance Essentials | Workbook 15
New organisational forms recognised in the Act include interdepartmental
executive boards and interdepartmental ventures. They are separate types of
public service agency. They may appoint their own employees.
• n interdepartmental executive board is made up of chief
A
executives and independent advisors, selected by the
Commissioner. The purpose of an interdepartmental executive
board is to align and co-ordinate strategic policy, planning, and
budgeting departments with responsibilities in a subject matter
area, and to support priority work and cross-department initiatives
in that area. It has a servicing department.
• n interdepartmental venture is an agency governed by a
A
board, which is made up of the chief executives of the relevant
departments. The purpose of an interdepartmental venture is to
deliver services or carry out regulatory functions that relate to
the responsibilities of two or more departments, and to assist to
develop and implement related operational policy.
Chief executives or boards may (with the Commissioner’s agreement) enter
into a joint operational agreement for their agencies to work together to
achieve stated goals.16 Institute of Directors State Sector Governance Essentials | Workbook
Compliance requirements for most state sector agencies include an obligation
to produce a Statement of Corporate Intent/Statement of Intent and an Annual
Report including a Statement of Service Performance (the exception to this
is an SOE).
In addition to reporting financial information many state sector entities also
have statutory requirements to report non-financial information about their
services (outputs) and the impacts/outcomes they achieve.
Under the Public Audit Act 2001 the Auditor-General is the auditor of all public
entities (including SOEs), and appoints auditors (from Audit NZ and private
firms) to carry out audits.
Most state entities are subject to parliamentary scrutiny, including
parliamentary questions to the responsible Minister about their activities.
Scrutiny by select committees through an annual review (previously called
a financial review) focuses on the entity’s performance during the previous
financial year and its current operations.
The select committee annual review hearing is open to the public and usually
the chair of the board will attend the committee hearing accompanied by the
CEO and CFO to answer questions put to them by committee members.
The Committee usually sends written questions to the entity before and after
the hearing.
Key characteristics of this governance setting
The relationship between government and the state sector entity can be
complex. It may be based on the State Owned Enterprises model, the
purchaser–provider model or some other model. Government agencies are
particularly vulnerable to ‘common agency’ – the name given to the relationship
where several principals exist and they each have influence on the one agent.
Common agency occurs where agencies are overseen by several layers of
government. It is considered that best-practice principles of governance apply
equally to the public sector.
The Public Service Commission (PSC) and the Office of the Auditor-General
(OAG) provide guidance on governance in the public sector. To see the range
of governance material available visit publicservice.govt.nz and oag.govt.nz
and treasury.govt.nz where the Owner’s Expectations Manual can be found.Institute of Directors State Sector Governance Essentials | Workbook 17
State-Owned Enterprises (SOEs)
SOEs are established under the State-Owned Enterprises Act 1986. They are
owned by the Crown and operate as commercial businesses. As registered
companies, they are also bound by the Companies Act 1993.
The board of directors is accountable to the shareholding ministers
(the Minister of Finance and the relevant portfolio minister).
Crown entities
Crown entities can have a range of functions – regulatory, policy or service
delivery. Crown entities provide many state sector services (eg health,
education, and transport). Crown entities are bodies that have their own legal
status but are still part of the Crown.
The Crown Entities Act 2004 reformed the law relating to Crown entities
and provided a consistent framework for the establishment, governance
and operation of Crown entities. It also clarified accountability relationships
between the entity, the board, the responsible Minister and Parliament.
The State Sector and Crown Entities Reform Act 2018
The State Sector and Crown Entities Reform Act 2018, passed in September
2018, amended the Crown Entities Act 2004 and the State Sector Act 1988 and
introduced four key changes:
1. Statutory Crown entity boards need to gain consent from (rather than
consult with) the State Services Commissioner (the Commissioner)
regarding their CEO’s terms and conditions of employment.
2. Fixed terms of appointment for statutory Crown entity CEOs were
introduced.
3. Boards and board members will be subject to a code of conduct. (still to
be developed)
4. The Commissioner’s inquiry and investigation powers have been expanded.
A Crown Entity “Board is the steward of the Crown’s ownership
interest and the primary monitor of the entity’s performance.”
Source: Enduring Letter of Expectations - to Statutory Crown Entities.
publicservice.govt.nz 15 October 201918 Institute of Directors State Sector Governance Essentials | Workbook
Figure 1: Accountability framework
Crown entity boards have overall responsibility for organisational performance
and are accountable to the Minister and through the Minister to Parliament.
Public
(voters)
Parliament
Key:
(including select
Auditor-General committees) Scrutiny of performance
Accountability
Answerable to
State Services
Commission Minister Service provision
The Treasury
Crown Entity Monitoring
Department
Board
Chief Executive
Staff
Public
(service users)
Source: ‘How are Crown Entities governed?’ (publicservice.govt.nz)
PSC’s Operating Expectations Framework (pictured below) illustrates three key
relationships for the board – the Minister, the monitoring department and its
own entity (CEO and staff).Institute of Directors State Sector Governance Essentials | Workbook 19
Figure 2: Operating expectations framework
Minister
Statutory Monitoring
Crown Entity Department
Source: Adapted from State Services Commission 2014
Boards are accountable for performance to the Minister , who is assisted by the
monitoring department. Treasury monitors commercial entities including the
SOEs, whereas other entities are monitored by the relevant department, for
example the Ministry of Health monitors DHBs and other health entities such
as Pharmac and the NZ Blood Service.
Monitoring departments also advise Ministers about board appointments and
administer Crown funding (appropriations).
Figure 3: Central government agencies
Public Services
• 3
2 Departments subject to the State Sector Act
• 4 Departmental Agencies subject to the State Sector Act
State Services
• 3 Non-Public Service Departments • ther organisations and
O State
• Crown Entities companies Services
subject to the Public
– Crown Agents Finance Act
– Autonomous Crown Entities State
• Reserve Bank of
– Independent Crown Entities New Zealand Sector
– School Boards of Trustees
– Crown Entity Companies (incl CRIs)
– Crown Entity Subsidiaries
• 2
Non-Public Service Departments • S tate-Owned Enterprises
• Offices of Parliament • Mixed Ownership Model
• Crown Entities Companies
– Tertiary Education Institutions
Source: New Zealand Government, State Services Commission, 16 July 202020 Institute of Directors State Sector Governance Essentials | Workbook
Board
appointments
Most appointments are made by the responsible Minister but not all –
for example DHBs have elected members as well as appointed members,
universities have representative members, some appointments are made
by the Governor General, etc.
Key points:
• Appointments are generally, but not always, made by the Minister.
• inisters are generally advised by monitoring/appointing
M
agencies (eg MBIE, MoE, Treasury’s board appointments unit.)
• ppointments should take account of any gaps in the board’s
A
skills, knowledge and experience and (where relevant)
representativeness – but other factors eg political influence can
also play a role.
• he minister generally considers the chair’s views when making
T
new appointments or reappointments to the board.
• lmost all appointments are referred to the Appointments and
A
Honours Committee of Cabinet and then to the Cabinet by the
responsible Minister.
Fee scales for directors are available on the PSC website in the Cabinet
Fees Framework.Institute of Directors State Sector Governance Essentials | Workbook 21
Office of the
Auditor-General (OAG)
The Auditor-General is responsible for auditing all public entities (extends
beyond financial). The OAG appoints auditors from Audit NZ and private firms –
eg KPMG – to conduct the audits under the Public Audit Act 2001. Performance
audits look at how effective services are being carried out.
The OAG audits give assurance that public entities are operating and accounting
for their performance, encourage good governance – eg provide reports and
guides – and provide advice – eg to select committees for annual reviews.
In April 2016, the OAG put out its report ‘Reflections from our audits:
Governance and accountability’.
Key points:
• here are a number of factors that make governance in the public sector
T
complex and challenging.
• ome of the essential elements needed for effective governance are not
S
always clearly present in the public sector.
• ublic entities sometimes do not have a conventional company/board
P
structure (for example, government departments and statutory officers.)
• ome public entities are statutory bodies required to operate within a
S
particular legal framework – they can do only what their founding/enabling
legislation permits.
• There can be conflicting objectives – profit or public good; risk or return.
• ome public entities are established to achieve only a particular purpose
S
– for example, Treaty settlements.
• irectors can be elected, appointed, or a mixture of both – creating the
D
possibility of capability issues, and/or mixed obligations to one or more
constituencies.
• here are understandably greater expectations of accountability and
T
transparency for those using public resources, meaning governors are
usually operating in the public eye, and
• ublic entities are often subject to strict expectations and rules for
P
conflicts of interest.22 Institute of Directors State Sector Governance Essentials | Workbook
Four Pillars of
Governance
Best Practice
The Four Pillars of Governance Best Practice is the Institute of Directors’
comprehensive reference guide to governance best practice, global trends and
the operating environment in New Zealand.
Pillar One – Determining purpose
The Four Pillars
of Governance The board adds value by leading the development
Best Practice
for New Zealand of the entity’s purpose, goals and strategy. The board
Directors
must take ownership of the entity’s strategic direction.
Long-term business sustainability is a critical focus
for the board.
Pillar Two – An effective governance culture
The board adds value by acting as a team with a high-
performance culture committed to engaged, quality
governance of the entity. It supports open debate,
diversity, thoughtful challenge and constructive
dissent. Directors lead through high standards of
ethical behaviour, commitment, candour and integrity.
This culture is characterised by effective relationships
iod.org.nz between directors and with management,
shareholders and stakeholders.
Pillar Three – Holding to account
A value-adding board holds management to account through informed, astute,
effective and independent oversight of performance and conformance matters.
It does not do the job of management but ensures purpose and strategy are
understood by management and implemented. The board sets the risk appetite
of the entity and oversees and monitors risk management.
Pillar Four – Effective compliance
The board adds value by ensuring the entity is, and remains, solvent. It
ensures the probity of financial reports and processes, and a high standard of
compliance with regulatory environments. Directors must comply with their
duties and responsibilities in relation to the entity, its shareholders and other
stakeholders. Excellence in governance is enhanced through complying with
the spirit as well as the letter of the law.Institute of Directors State Sector Governance Essentials | Workbook 23 Summary Good governance adds value to organisations and the board is the key agent of governance. Board members must understand their organisation and the environment in which it operates, and have clarity on their roles and responsibilities. For effective board operation, a range of documents including legislation, the constitution and board charter can be used to provide clarity of roles and hold the board members to account. These can be complemented with protocols, policies and practices to ensure behavioural expectations are met. The board needs to ensure its composition and culture is appropriate for the organisation with ministers, monitoring departments and management (especially the CEO) being critical to board success.
24 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
Presentation
slides
1.
Kāinga Ora
Governance Capability Uplift
Programme
State Sector Governance Essentials
2.
Chatham House rule appliesInstitute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 25
3.
Learning objectives for
today
• Gain an enhanced understanding of the state
sector governance landscape and the
characteristics of ‘good’ governance in the state
sector.
• Understand the Four Pillars of Good Governance
and identify key board and committee governance
responsibilities.
• Gain insights into the challenges of being in a state
sector governance role.
• Participate as a cohort of leaders supporting and
enhancing individual and group knowledge and
skills.
3
4.
What do you want
to get out of today?
“A goal without a plan is just a wish.”
Antoine de Saint-Exupery
4
5.
Spirit of service
“People sign up to the Public
Service because they have a
spirit of service to the
community…”
Peter Hughes, SSC
526 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
6.
State sector landscape
• 1982
• 1986
• 1988
• 1989
• 1992
• 2001
• 2004
• 2005
• 2020
6
7.
State sector reforms
• A unified public service
• Māori–Crown relations
• Employment and workforce
• Public service leadership
• Organisations of the public service
8.
Kāinga Ora - Homes and
Communities Act 2019
• Establishes Kāinga Ora
• The law on what we do and how
we do it
8Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 27
9.
Kāinga Ora’s operating
principles
• 13 operating principles
• Engagement and partnering
• Māori interests
9
10.
Kāinga Ora’s Māori
interest obligations
• Operating principles
• Te Tiriti o Waitangi
10
11.28 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
12.
ACTIVITY
Activity
To effectively discharge its functional obligations, how
might Kāinga Ora officials need to work collaboratively
within the Crown to support the Crown to fulfil its Tiriti
obligations?
12
12
13.
Map of the public
sector
Spheres of
influence
13
14.
Accountability
framework
Parliament
Select Committee
Minister
Treasury
Public Service Commission
Monitoring and funding
departments
Office of the Auditor-General
Office of the OmbudsmanInstitute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 29
15.
Powers of the minister
• Set expectations for strategic direction and performance.
• Monitor results and hold board to account.
• Request information.
• Appoint, reappoint and remove board members (in partnership).
• Direct entity to perform new functions.
• Direct changes to entity's SOI or SPE.
• Give statutory directions (varies).
15
16.
Parliamentary select committees
16
17.30 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
18.
Annual cycle
18
19.
Similarities with
differences
• Setting strategic direction.
• Funding and budget processes.
• Decision-making and
accountability.
• Monitoring and reporting.
• Board appointments.
• Chair appointment.
19
20.
What is
governance?
“Corporate governance comprises the
principles, practices and processes that
determine how a company or other entity
is directed and controlled.”
Financial Markets Authority,
Corporate Governance Handbook (2018)
20Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 31
21.
Purpose of
governance
To support the entity to achieve its
purpose through adding value to the
operations of management.
Good governance:
• is underpinned by the values of
responsibility, accountability, fairness
and transparency
• involves strategic oversight of an
entity’s operations.
21
22.
Why does governance
matter?
• Governance helps the entity achieve its
fundamental purpose and ensures the
likelihood of its survival.
• Provides leadership, credibility,
transparency and accountability.
• Provides focus for senior management
and is important in mitigating risks.
• Good governance benefits the entity’s
brand and society at large.
22
23.
Governance/management
Governance: What, Where, Why? GOVERNING
• Leadership role.
• Longer-term focus and helicopter view.
• Monitors and holds management to account.
• Adds value beyond management. MANAGING
Management: How?
• Executes board-approved strategy.
• Works to the business plan.
OPERATING
• Day-to-day operational focus.
• Adds value.
2332 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
24.
Board member
responsibilities
• Act in good faith and in the best interests of the
organisation.
• Not act or allow the organisation to act in breach of
its founding document or legislation.
• Remain solvent.
• Exercise care, diligence, and skill.
Distilled from the Companies Act 1993, Trusts Act
2019, Crown Entities Act 2004 and the current
Incorporated Societies Bill.
24
25.
The role of the board
• Provides advice, support and guidance
to management.
• Provides leadership and oversight to
the business.
• Appoints and manages the CEO.
• Makes decisions on behalf of the
organisation.
• Is accountable to shareholders and
owners.
Shared leadership of an entity is led by the board
and implemented by the CEO and senior leaders.
25
26.
What is the role of
Kāinga Ora’s internal
governance groups?
1. Ngā Pae Tātaki
2. Programme Governance Boards
(PGBs)
26Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 33
27.
The Four Pillars of
Governance
The governance responsibility is:
• determining purpose
• an effective governance culture
• holding to account
• effective compliance.
27
28.
Determining
purpose
28
29.
Core purpose
• The organisation’s reason for being.
• How it creates value for its stakeholders.
• It drives ethical behaviour.
• A check on actions.
• Guides culture.
• Typically aspirational.
• Should be achievable.
• Most powerful when expressed as a
statement of belief.
2934 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
30.
Foundational documents
Set out the purpose/objective, rights, powers
and duties of the board, directors, entity and
shareholders/members.
• Constitution and shareholder agreement.
• Trust deed.
• Partnership agreement.
• Rules and legislation.
30
31.
Setting strategic direction
31
32.
Strategy and the board’s
role
• The board’s role is to be future-focused.
• Develop organisation’s strategy with
management.
• Contribute, test and challenge, approve
and own.
• Monitor implementation.
• Provide a framework for decision-making.
• An effective board spends time balancing
strategy and compliance.
32Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 35
33.
Strategy
Strategic
Purpose
Strategy plan
Business Budget
Plan Year 1
Context
Business Budget
Risks Plan Year 2
33
34.
The board and risk
• Entire board accountable for risk
management.
• Role includes:
✓ identification – what are the key risks?
✓ ensuring framework to manage and
mitigate risk
✓ ongoing monitoring of new and existing
risks
✓ oversight and management of non-financial
risks
✓ determining the risk appetite of the entity.
34
35.
An effective governance
culture
3536 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
36.
State sector culture
“Cherished public service principles like ‘spirit of service’ to the community,
political neutrality, free and frank advice and merit-based appointments will be
embedded in the new Act. These principles are important…
…they help safeguard the constitutional conventions governing the public
service, promote ethical conduct, and enable cross-agency collaboration on
services and outcomes for New Zealanders.”
Hon. Chris Hipkins – Public Service Reforms Announcements (June 2019)
36
37.
Kāinga Ora values – Ō Tātou Uara
38.
Group dynamics
• Group culture plays a key role in
determining group performance.
• Certain behaviours can identify a group
that is functioning well.
• Board’s relationship with management is
part of its culture.
• Ethical practice is fundamental to good
governance.
• Conflict is not inherently bad – the way it
is dealt with is key.
38Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 37
39.
Code of conduct
Guidelines set by the board to:
• promote good practice
• ensure high standards of behaviour and
accountability throughout the entity.
It may be legal but is it right?
39
40.
Policies
• Delegations of authority.
• Communication policy.
• People policies.
40
41.
Holding to
account
4138 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
42.
Governance
meetings
• Preparation
• Conduct
• Agenda
• Minutes
Board meetings are the engine room of the
board, where most decisions are made and
management is held to account.
42
43.
Governance work plan
At least once a year governance bodies
should step back and look at their own
processes.
• Annual timetable for an orderly approach
to routine work.
• Helps the body deliver on their
responsibilities and monitor progress
against objectives, goals and duties.
• A dynamic work plan enables a forward-
facing governance body.
• Forward focus increases engagement
and interest.
43
44.
Monitoring performance
at Kāinga Ora
• What does the Board monitor?
• What do Ngā Pae Tātaki monitor?
• What do Programme Governance
Boards monitor?
44Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 39
45.
Effective
compliance
45
46.
Kāinga Ora Specific
Legislation
Housing related legislation:
• Residential Tenancies Act 1986
• Public and Community Housing
Management Act 1992
• Housing Act 1955
Urban Development legislation:
• Urban Development Act 2020
46
47.
Other laws and regulations
Consumer guarantees
Privacy
Employment relations Fair trading
Finance
Environmental legislation
NZX rules
Health and safety
State sector
Official information
Takeovers
Building code
Commerce
Insolvency
4740 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides
48.
Financial literacy for
governors
• oversight of reporting requirements
• approving budgets and capital
expenditure
• sourcing and managing debts
• identifying ‘red flags’
• analysing data and potential implications
• understanding the financial health of the
organisation.
48
49.
The Four Pillars value-adding model
Effective Determining
compliance purpose
Good
governance
Effective
Holding to
governance
account
culture
49
50.
Clarity, curiosities
and commitments
50Notes:
iod.org.nz Institute of Directors in New Zealand (Inc) Mezzanine Floor, 50 Customhouse Quay PO Box 25253, Wellington, 6146 New Zealand Telephone +64 4 499 0076 Email mail@iod.org.nz
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