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: • Examine the opportunities for supporting effective governance in the state sector. • Gain an enhanced understanding of how state sector governance operates 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 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
• Cabinet Manual 2017 dpmc.govt.nz • Statutory Crown Entities A Guide for Ministers, June 2014 publicservice.govt.nz • Board Appointment and Induction Guidelines Updated October 2015 publicservice.govt.nz • Code of Conduct for Standards of Integrity 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 • Financial Markets Authority (FMA) Corporate Governance in New Zealand – 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: • provides a more flexible set of options for how the public service can organise itself to better respond to specific priorities • allows public servants to move between agencies more easily • clearly establishes the purpose, principles and values of an apolitical public service, as well as its role in government formation • supports the Crown in its commitment to and its relationship with Māori • strengthens leadership across the public service and, in particular, provides for system and future focused leadership • shifts the focus from state services to public services, changing the name of 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: • developing and maintaining the capability of the public service to engage with Māori and to understand Māori perspectives • supporting their Minister to act as a good steward of the public interest, 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.
• An interdepartmental executive board is made up of chief 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. • An interdepartmental venture is an agency governed by 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 2019 18 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 • 32 Departments subject to the State Sector Act • 4 Departmental Agencies subject to the State Sector Act
State Services • 3 Non-Public Service Departments • Other organisations and State • Crown Entities companies Services subject to the Public – Crown Agents Finance Act State – Autonomous Crown Entities • 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 • State-Owned Enterprises • Offices of Parliament • Mixed Ownership Model • Crown Entities Companies – Tertiary Education Institutions
Source: New Zealand Government, State Services Commission, 16 July 2020 20 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. • Ministers are generally advised by monitoring/appointing agencies (eg MBIE, MoE, Treasury’s board appointments unit.) • Appointments should take account of any gaps in the board’s skills, knowledge and experience and (where relevant) representativeness – but other factors eg political influence can also play a role. • The minister generally considers the chair’s views when making new appointments or reappointments to the board. • Almost all appointments are referred to the Appointments and 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: • There are a number of factors that make governance in the public sector complex and challenging. • Some of the essential elements needed for effective governance are not always clearly present in the public sector. • Public entities sometimes do not have a conventional company/board structure (for example, government departments and statutory officers.) • Some public entities are statutory bodies required to operate within a 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. • Some public entities are established to achieve only a particular purpose – for example, Treaty settlements. • Directors can be elected, appointed, or a mixture of both – creating the possibility of capability issues, and/or mixed obligations to one or more constituencies. • There are understandably greater expectations of accountability and transparency for those using public resources, meaning governors are usually operating in the public eye, and • Public entities are often subject to strict expectations and rules for 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 applies Institute 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
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5.
Spirit of service
“People sign up to the Public Service because they have a spirit of service to the community…”
Peter Hughes, SSC
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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
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9. Kāinga Ora’s operating principles
• 13 operating principles • Engagement and partnering • Māori interests
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10. Kāinga Ora’s Māori interest obligations
• Operating principles • Te Tiriti o Waitangi
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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?
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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 Ombudsman Institute 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).
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16. Parliamentary select committees
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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.
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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)
20 Institute 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.
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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.
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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.
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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.
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26. What is the role of Kāinga Ora’s internal governance groups?
1. Ngā Pae Tātaki 2. Programme Governance Boards (PGBs)
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27. The Four Pillars of Governance
The governance responsibility is: • determining purpose • an effective governance culture • holding to account • effective compliance.
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28.
Determining purpose
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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.
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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.
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31. Setting strategic direction
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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.
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33.
Strategy
Strategic Purpose Strategy plan Business Budget Plan Year 1
Context Business Budget Risks Plan Year 2
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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.
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35.
An effective governance culture
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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)
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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.
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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?
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40.
Policies
• Delegations of authority. • Communication policy. • People policies.
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41.
Holding to account
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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.
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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?
44 Institute of Directors State Sector Governance Essentials | Workbook | Presntation Slides 39
45. Effective compliance
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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
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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
47 40 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.
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49. The Four Pillars value-adding model
Effective Determining compliance purpose
Good governance
Effective Holding to governance account culture
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50.
Clarity, curiosities and commitments
50 Notes: 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 [email protected]