Information for New
Members of Crown
Entity Boards
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Outline of content
1 What are Crown entities and where do they fit in the
State services environment?
2 How do Ministers influence Crown entities?
3 Accountability and scrutiny of Crown entities
4 Developing effective relationships
5 Governing a Crown entity
6 Expectations of board members
7 Applying public sector values
8 Additional resources
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1 What are Crown entities and
where do they fit into the State
services environment…?
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Elements of New
Zealand’s System of
Government
Constitutional
Monarchy
(represented by
Gov-General)
Legislative Branch
Parliament
Executive Branch
Government
Judicial Branch
Courts, Tribunals
Makes
law
Develops and
administers law
Interprets and
applies law
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Components of New Zealand’s System of
Government include…
Cabinet




Established by convention, with no constitutional basis. Powers
are held by individual Ministers in their own right.
An important forum for Ministers to work together to determine
Government policy and processes
Has a strongly enforced convention of collective responsibility
Supported by Cabinet Committees, eg APH
Caucus



Each party in Parliament has a caucus comprising all its MPs
Can be very influential, eg when the governing party has to
depend on the vote of every MP within its sphere of influence
Government caucus often consulted on board appointments
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Public Sector
City & District Councils
Regional Councils
State Sector
State Services
Legislative
branch
non-Public
Service
departments
Executive
branch
non-Public
Service
departments
Office of Clerk
Parl. Service
Police; NZDF
NZSIS; PCO
Public Service
Departments on 1st Schedule of
State Sector Act
Crown Entities (except TEIs)
-
Reserve
Bank
State-owned
enterprises
Statutory Crown entities (Agent, ACE, ICE)
Crown entity companies
Crown entity subsidiaries
School boards of trustees
Agencies on
4th Schedule
of Public
Finance Act
Offices of
Parliament
Crown Entities: Tertiary Education Institutions (TEIs)
Other agencies ‘associated with a Ministerial Portfolio’ e.g. NZ Council of Legal Education; QE II National Trust
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‘Crown entities’ are a key part of the
Public Sector
They constitute a wide variety of public organisations
delivering many public services
They are often the 'face of government‘ delivering:


Almost all public health, education, transport and housing
services
Key regulatory functions
Crown entities are collectively responsible for:



more than 50% of the Crown’s operating expenditure
The management of approximately 2/3 of the Crown's physical
assets
over half the workforce employed in the State services
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On one hand they are ‘stand-alone’ but,
on the other…
Crown entities are separate from the Crown - legal
entities in their own right
Because of their functions and the nature of their work
they are designed to operate at 'arms length’ from
Ministers because, for example:



Decisions on individual cases should not be influenced by
Ministers
Ministers should be distanced from operations
Entities require access to a broad range of skills
However, Ministers are still answerable to Parliament
for the entities’ performance
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The legislative framework for Crown
entities consists of…
The Crown Entities Act 2004



provides a consistent framework for the establishment, governance and
operation of Crown entities;
clarifies accountability relationships between Crown entities, boards,
responsible Ministers and Parliament; and
clarifies powers and duties of board members.
The entity’s own statute
Each Crown entity is established under and shaped by its own statute
which can negate or modify any provisions of the Crown Entities Act.
And other legislation including:
State Sector Act 1988. Public Finance Act 1989
Companies Act 1993. Official Information Act 1982
Ombudsmen Act 1975. Public Audit Act 2001.
Various Acts relating to employment and human rights
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There are 3 basic categories of
statutory Crown entities …
Crown Agents
Autonomous Crown Entities (ACEs)
Independent Crown Entities (ICEs)
The differences between the categories include the
nature of the work they do, the provisions for board
member appointments, and ministerial powers ot
direction.
There are also other types of Crown entity (Crown entity
companies, Crown entity subsidiaries, School Boards of
Trustees, and Tertiary Education Institutions)
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Differences between statutory entities
Crown Agent
Autonomous
Crown Entity
Yes
Power for
Minister to
appoint Board
Members?
Power to remove
Board Members?
Yes
Yes, at Ministers’
discretion
Yes, by Minister
for justifiable
reason in
Minister’s opinion
Power to direct
on Government
Policy of the
Day?
Whole of
Government
Direction?
Must ‘give effect
to’ policy if
directed by
Minister
Must ‘give effect
to’ if directed by
Ministers of State
Services and
Finance
Must ‘have regard
to ’policy if
directed by
Minister
Must ‘give effect
to’ if directed by
Ministers of State
Services and
Finance
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Independent
Crown Entity
No, Gov-Gen
appoints on
recommendation
of Minister
No, by Gov-Gen,
for just cause , on
Minister’s advice.
Attorney General
consulted
No, unless
specifically
provided for in
another Act
Must ‘give effect
to’ if directed by
Ministers of State
Services and
Finance
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Each Crown entity has a
‘responsible Minister’ who …
Oversees and manages the Crown's interests in and
relationships with the entities that are within their portfolio
Represents the public interest in the entity (and, in private
sector terms, is the de facto ‘shareholder’)
Ensures an effective board is in place to govern the entity
Influences the entity’s strategic direction
Monitors and reviews Crown entity performance and results
Manages risks on behalf of the Crown
Carries out any statutory responsibilities
Note: The Ministers of Finance and State Services also have
important roles to play in the Crown entity sector.
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Ministers expect boards to…
be aware of demands on Ministers both Parliament,
taxpayers and other interested parties
accept that the Crown has interests wider than those of
ordinary shareholders in private companies
understand (and embrace) wider Government policy issues
as part of their decision- making
provide assurance of effective organisational performance
(delivery of results) and conformance with statutory functions,
powers, duties, etc
be aware of and keep Ministers informed about the potential
implications of organisation-specific issues on the Crown
ensure their Crown entity behaves prudently and sensitively
and in keeping with public sector values
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‘No surprises’
Boards have authority but Ministers are ultimately answerable
for the actions of their Crown entities to Parliament and the
public.
Ministers expect to be informed as fully and as early as
possible of any entity issues that may impinge on the
Government’s responsibilities or be potentially contentious
Proactivity and timeliness in applying the ethos of 'no
surprises' is essential to the integrity of the relationship and to
mutual trust and confidence.
A 'no surprises' way of working is not intended to interfere with
entities' statutorily independent functions nor with boards'
operational responsibilities.
Note: Crown entities should apply the same principles to their relationships with
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Ministers are supported by monitoring
departments
However a Crown entity is funded, a monitoring
department provides the Minister with information,
analysis and advice on its effectiveness and efficiency
A monitoring department is expected to focus on major
opportunities and risks
Monitoring departments support Ministers in the process
of identifying skill needs and appointing board members
A department’s authority to undertake its monitoring role
derives from its position as the Minister’s agent
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2 Ministers influence Crown
entities in various ways…
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… through making board appointments
Mostly made by Ministers; ICE board members are
appointed by the Governor-General.
Ministers’ recommendations for appointment almost
always go to the Cabinet Appointments and Honours
Committee and often to the government caucus.
Appointments are for a fixed term.
Appointees may be offered a second or subsequent term
of office but there is no guarantee of this.
Ministers and the Governor-General have powers of
removal.
No compensation or other benefit for loss of office.
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… by participating in an on-going dialogue
with entities..
For example:
Meetings


Ministers typically hold regular meetings with the board chair (or with
senior management acting under authorisation from the board) to
discuss strategic issues. Monitoring department representatives will
often be present
Ministers may also have periodic meetings with the full board
Regular reporting

There are requirements are in place for periodic reporting by entities
Briefings


For their part, boards are expected to advise their Minister in advance of
any major initiatives or developments
See also ‘no surprises’
Ideally, informal engagement between boards and responsible
Ministers should precede
and
inform
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The Managing For
Outcomes/Results
Cycle
… by participating in formal strategic
direction setting processes, for which
there are various channels…
(1) Letter of Expectation
This can be a valuable way to initiate the strategic planning process and is often
the subject of prior consultation between Minister and entity
A letter of expectation sets out a Responsible Minister’s
expectations for:
The Crown entity’s strategic direction
Its governance and performance; and
His/her specific priorities for the planning period
Monitoring and information expectations
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(2) Statement of Intent (SOI)
The SOI is the centrepiece of the accountability
relationship between a Crown entity board and its
Minister
Through the preparation of its SOI a board outlines its
strategic thinking and future intentions, and frames its
actions (it is expected that the SOI process will be driven by the
board, not by management)
Should reflect Government objectives for both the sector
and for individual Crown entities, and wider Government
policy initiatives and themes
Ministers should be given sufficient time to review and
comment on drafts. Within limits, as set out in the CE
Act, they may direct SOI content
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Through various other processes and
agreements, such as …
Output agreements

Detail the outputs to be supplied, including those paid for by third
parties where the Minister has some responsibility for setting fee
levels or service specifications
Memoranda of Understanding (MOU)




Mostly used to document the Government’s performance
expectations of a Crown entity and enable the Minister and the
entity to record their understanding of the basis for monitoring,
and accountability of the entity. The MOU supplements the SOI
Annual Report
An assessment of performance against that outlined in the SOI
Ongoing performance reporting, eg quarterly reports
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And by monitoring Crown entity
performance…
Ministers ‘oversee and manage’ Crown entities (and are
answerable to Parliament for their entities’ performance)
They obtain advice from monitoring departments about
the entities' effectiveness and efficiency, and how any
risks will be managed
Ministers can require Crown entities to supply a wide
range of information
They rely on good reporting from the entity and are
assisted by monitoring departments as their agents
Ministers are also able to formally review a Crown
entity’s operations and performance at any time
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Ministers have powers to direct some
Crown entities
Ministers may direct a Crown Agent or ACE (eg,
in relation to policy or implementation).
Powers of direction are likely to be used
infrequently, and there are limits on the ability to
direct. Ministers must consult with the affected
entity
Whole of Government directions may be issued
Directions must be in writing. They are tabled in
Parliament and notified in the Gazette.
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3 As part of the State services,
Crown entities must
demonstrate high standards of
accountability, and expect to
experience considerable public
scrutiny…
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Through accountability to Parliament…
Despite the ‘arm’s length’ relationship, Crown entities
operate within a political setting
Ministers responsible for Crown entities are answerable
to Parliament
A Crown entity can support its Minister by, for example:



appropriate and transparent reporting (often by supplying
information via the monitoring department)
open and constructive engagement with Select Committees
Following a ‘no surprises’ approach
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…scrutiny by Select Committees…
Crown entities may appear before Select Committees:


As witnesses (e.g. in relation to Estimates, financial review or
enquiries)
As advisors (e.g. on a bill)
See guidelines at www.ssc.govt.nz/officials-and-selectcommittees-2007
Information and answers must be full and honest
Parliamentary privilege applies. There must be no
pressure on officials, or action taken against them, for
giving evidence.
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Select committees - continued
Entities should be represented at an appropriate level:
usually the chair in respect of Crown entities
Entities should take a "no surprises" approach with their
Minister e.g. giving advance notification of a submission.
‘Protections’ are available to officials but, given a Crown
entity's accountability to its board and Minister, loss of
confidence could result from flouting the conventions.
Responsibility for explaining and justifying government
policy ultimately rests with Ministers.
Board members can appear in a personal capacity.
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…by contributing to answers to Parliamentary
Questions, OI Act requests, Ministerial
correspondence, etc…
Ministers have to respond to various forms of request for
information concerning Crown entities in their portfolios.
Crown entities need to provide information to enable
Ministers’ offices or departments to prepare appropriate and
accurate responses.
The timelines for responses can be very short.
Documents created by Crown entities (even internal emails) are subject to disclosure under the OIAct.
All of this place strong disciplines on departments and
entities re record-keeping, productive relationships,
responsive processes, etc.
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…and also, through the audit process
The Office of the Auditor-General provides independent
assurance to Parliament that State sector organisations
are operating, and accounting for their performance, in
accordance with Parliament’s intentions, and in terms of:





Performance
Authority
Waste
Probity
Accountability
The OAG audits some 3000 Crown entities (incl School
Boards Of Trustees) and undertakes a wide variety of
inquiries, reviews, etc
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4 The development and
management of effective
relationships is crucial for
Crown entity success…
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For Crown entity boards the key
players include…
Responsible Ministers and their offices
Monitoring departments
Crown entity chief executives and senior managers
Other Crown entities in or affecting the sector
Central agencies
The OAG
Select committees
Each entity will have other stakeholders that are specific to
their business and with whom effective relationships
need to be developed and managed.
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The central agencies are:
Department of the Prime Minister and Cabinet (DPMC)
Advises the Prime Minister
Coordinates policy advice
State Services Commission (SSC)
advises the Minister of State Services
provides guidance to Crown entities and monitoring departments on:

appointment terms & conditions of chief executives and
subsequent reviews of conditions

integrity issues and standards of behavior and conduct

board member fees (Crown agents and ACEs)
The Treasury
advises the Minister of Finance
has oversight of budget planning, Crown entity financial obligations
and reporting
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5 Governing a Crown entity
is both similar to and different
from governing any other
substantive organisation…
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A Crown entity board…
Sets the entity’s strategic direction
Exercises the entity’s powers and functions itself
or through delegation, empowering the CEO and
others to implement the board’s policies
Appoints and oversees performance of the CEO
Ensures the entity’s functions are performed
efficiently and effectively
Manages risk and ensures compliance
Provides assurance of fiscal responsibility
Maintains appropriate relationships with key
stakeholders
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High standards of governance
effectiveness require active
performance management…
Crown entity boards need to demonstrate the highest
possible standards of corporate governance, and to know
how their entity is performing
Boards have a high degree of control over their own
processes and structures
Boards have collective responsibility and need to speak
with ‘one voice’, once a decision is taken
Boards should undertake regular self-assessments of their
own effectiveness, which may include assessments of
individual members as well as the board as a whole.
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A Crown entity is guided in some
aspects of its employment relationships
A Crown entity board appoints the entity Chief
Executive, and oversees his/her performance.
There are some important differences from
company board practices, eg Crown entity
boards must consult with SSC on the terms &
conditions of employment of the Chief Executive:
prior to appointment; and
when conditions of employment, including remuneration, are
reviewed (statutory entities only)

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Crown entities must act as ‘good employers’
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Fees for Board Members
Board fees for Crown Agents and ACEs are set in
accordance with a framework approved by Cabinet
(the ‘Cabinet Fees Framework’)
Fees are set at different levels according to the role
and responsibilities of the entity
Exceptions are possible – but require a sound
rationale and must go through a Ministerial and/or
Cabinet approval process
Remuneration Authority has this role in relation to ICEs
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6 A lot is expected of board
members collectively, and
individually…
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Collectively, boards are expected to…
Act consistently with the entity’s objectives, functions,
the current SOI and any output agreements
Ensure that a statutory entity performs its functions
efficiently and effectively, and in a manner consistent
with the spirit of service to the public
Ensure the entity operates in a financially responsible
manner, by prudently managing its assets and liabilities
and endeavouring to ensure long-term financial viability
Ensure the entity complies with its obligations in relation
to the Crown Entities Act and other applicable legislation
or statutory provisions
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In terms of performance assurance…
Boards have the primary responsibility for monitoring
and reporting on a Crown entity’s performance – they
must know what is happening in their agency
Ministers have both a need and a right to know - boards
should provide information on which valid judgments can
be made about an entity’s performance
Boards are expected to work constructively with
Ministers and monitoring departments to identify the
performance measures and standards that will support
accurate and appropriate judgments about the Crown
entity's performance and progress
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Individually, board members are
expected to…
Comply with the Crown Entities Act, their entity’s
enabling Act and other relevant legislation
Act with honesty and integrity
Act in good faith and not at the expense of the entity’s
interests
Act with reasonable care, diligence and skill (as a
‘reasonable person’ would in the same circumstances)
Avoid disclosing information obtained in their capacity as
a member, unless in specified circumstances
Note: Both the board and its individual members can be
sanctioned for aCrown
breach
of duties
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Liabilities and indemnities
The Crown Entities Act gives individual members and
other personnel immunity from civil liability when they
have acted in good faith in performance or intended
performance of the entity’s functions
There is no immunity from criminal liability
A board may indemnify and insure its members and
other statutory entity personnel
Coverage may not be effected for an office holder or
employee for any act or omission made in bad faith
and/or not conducted in the performance or intended
performance of the entity’s functions.
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7 Preserving the integrity of
public sector values means …
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…you will have actively considered
conflicts of interests before accepting
appointment
Before appointment, a prospective board member must
disclose to the Minister the nature and extent of all
interests that they have, or are likely to have, in matters
relating to the entity.
The responsible Minister is required to confirm, in the
submission to APH, that this disclosure has been made.
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… after appointment, you should
disclose interests …
When you:
may derive a financial benefit (including remuneration as an
employee);
are the spouse, de facto partner, child or parent of a person who
may derive a financial benefit;
have a financial interest in a person to whom the matter relates;
are a partner, director, officer, board member, or trustee of a person
who may have a financial interest in a person to whom the matter
relates;
may be ‘interested’ because of a provision in the entity’s Act;
are otherwise directly or indirectly interested in the matter (‘interests’
are not only financial)
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…and then manage proactively any
conflicts of interest you may have
A board member of a statutory entity, who has an interest (as defined
in legislation):
Must not vote or take part in any discussion or decision of the board
relating to the matter or otherwise participate in any activity of the
entity that relates to the matter;
Must not sign any document relating to the matter; and
Must be disregarded for the purpose of forming a quorum for any
part of a meeting of the board relating to the matter.
Exceptions to these requirements may be made by the chairperson if
he/she is satisfied it is in the public interest
The pragmatic test – “how will it look on the front page of tomorrow’s
paper?”
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…and having standards of conduct for
board members and for employees …
New board members must be familiar with their board’s
policy manual or charter; in particular, its standards of
integrity and conduct setting out explicit expectations in
relation to potential probity issues
Boards should satisfy themselves that their entity’s own
code of conduct and practices reflect the principles of the
Standards of Integrity & Conduct for the State Services
(eg, on offering and accepting gifts & hospitality), and
should endorse its adoption for all entity employees
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During an election year …
Advertising/publicity to be consistent with
Electoral Finance Act
Handling OI Act requests
Senior staff wishing to stand for
Parliament
Use of your agency’s resources
SSC guidance:
www.ssc.govt.nz/election-guidance-2008
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Additional Resources
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State Services Commission
General guidance and Information for Crown Entities:
www.crownentities.ssc.govt.nz
This will include links to specific reports and guidance as they are
made available, eg:

Preparing the Statement of Intent (December 2007)

Officials and Select Committees - Guidelines (August 2007)

Preparing the Annual Report (July 2007)

Board Appointment and Induction Guidelines (May 2007)

Planning And Managing For Results - Guidance For Crown
Entities (September 2005)

Letter to Statutory Crown Entities on the Crown Entities Act
(December 2004)

Statement of Government Expectations of the State sector and
Commitment by the Government to the State sector (March
2001)
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The Treasury
www.treasury.govt.nz/crownentities/default.asp#financialpowers
Cabinet Office
Ministers' Roles and Responsibilities in Relation to Crown Entities

Cabinet Office Circular CO (06) 5
www.dpmc.govt.nz/cabinet/manual/index.html a
Office of the Auditor General
See also www.oag.govt.nz for documents that may be of interest,
eg:
Managing Conflicts of Interest: Guidelines for Public Entities (June
2007)
Controlling Sensitive Expenditure: Guidelines For Public Entities
(February 2007)
Severance Payments and the Public Sector (May 2002)
Other sources
www.govt.nz
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