Chapter 2: Recruitment of Members for Boards and Bodies

Sections in this Chapter: 

Planning ahead

Boards need a good combination of background experience, skills, qualifications and personal qualities to provide the foundation for a high-performing board. The recruitment and appointment process is a critical first step to ensuring effective members are appointed to boards.

Departments must ensure they have full and accessible information on the terms and conditions of appointment of current members of all boards for which their Minister is responsible, to ensure their administrative systems will provide reminders about pending vacancies in good time. A good first step is to draw up a project timeline for the appointment process taking into account the factors discussed below and the appointment / reappointment flowchart presented below.

Throughout the recruitment and appointment process, everyone involved needs to clearly understand their respective roles, both in terms of formal authority and decisions based on delegated responsibilities. Boards need to be maintained at 'full strength', i.e. with the required mix of skills, sufficient numbers for a quorum to be available consistently, and avoiding a workload that becomes unmanageable.

Getting the Minister's agreement to the process

On identifying an impending vacancy the department should - in consultation with the board chair - notify the responsible Minister in writing, to:

  • suggest a recommended appointment process
  • provide a tailored position description, to supplement any general information that is already available
  • offer preliminary advice on the skills and experience of the person required to fill the vacancy, in light of the board's current make-up and the entity's future work programme
  • explain the basic legislative and Cabinet requirements associated with the appointment
  • advise the process the department intends to run, unless the Minister directs otherwise
  • advise if a fees review will be undertaken concurrently with the appointment process
  • ask the Minister for an indication of the likely extent of his or her direct involvement in the process.

The appointment processes are deemed to be delegated to the department concerned, unless the Minister wants them handled differently. Ministers always retain the ultimate responsibility for the appointment. However, officials need to be familiar with all applicable legislation or other documents. For example, in addition to the Crown Entities Act 2004 enabling legislation for a particular entity may contain additional or overriding requirements that are crucial to the appointment process.

See: Appointment / reappointment flowchart for downloading printing (JPG file 190k)

Notes: (a) If a fee review is required you need to commence an aligned process and may need to adjust timelines. (b) Advertisements in this diagram cover any type of recruitment, for example, use of nominating agencies, head hunting, use of publications, websites, email trees, your own database if you have one.

Departments should give their Ministers a periodic briefing on the overall picture of upcoming board vacancies for all the entities within the Minister's portfolio/s. This should include the objectives and functions of each entity, current board membership, fees and allowances, which members' terms are expiring, whether they are eligible for reappointment, suggestions for revised skill sets and/or succession planning for the chairs.

Particular issues concerning new boards

When a new board is being established, early engagement with the Minister and with stakeholders will be particularly important, to ensure the board is effective and credible in fulfilling its role. This provides a good opportunity to clarify expectations and relationships from the start of the board's life. Considering the full complement of members at the same time also enables consideration of the diversity/balance of the board membership as a whole. Departments should pay particular attention to providing information on interests and the duties of members when a new board is being appointed. Departments also need to identity how the fee will be set for the board and ensure that this process runs concurrently with the appointment process (see Chapter 3: Remuneration for members of boards and other bodies).

Timeframes and timelines

Many factors impact on the time taken to complete the process, including the fact that appointments require reference to Cabinet.

Where possible, departments should start the process for appointing board members at least 6 months before the expiry of a current term, and at least 9 months ahead if the vacancy is for a chair. At the earliest possible stage, the Minister's view should be sought on whether reappointment of an incumbent is likely to be considered (see the Chapter 4 section Terms of Office).

The Cabinet Office coordinates and issues a Schedule of Upcoming Appointments to Ministers at the beginning of each year, using information gathered from departments. Ministers who want to know more about a board vacancy within another portfolio should contact the office of the responsible Minister as early as possible in the appointment 'cycle'.

Time must be allowed for the process to proceed in a thorough manner, although some vacancies arise unexpectedly in which case it may not be possible to follow the full process. If important aspects of the process are done under pressure, there is a risk of an inadequate search for candidates with the desired skills, incomplete reference checks, insufficiently well-informed candidates or rushed interviewing.

Boards should have an ongoing process for identifying, developing or seeking the skills they will need to meet the challenges they face in the foreseeable future. Feedback from the chair should be factored into the board appointment process. A key element is to achieve a balance between the ideas and approaches that new members can bring and the value that comes from retaining the experience of existing members. Staggering the terms of office of board members helps to ensure a core of experience is always available.

Succession planning for board chairs is likely to attract greater attention from Ministers; for instance, whether a future prospective candidate for the chair should first serve a term as board member. Timing is important; for instance, announcing a new board chair too 'soon' may hinder the current board's ability to take decisions.

Timetable for filling a vacancy

The timetable for filling a vacancy needs to take account of factors such as:

  • when the incumbent's terms ends
  • reviewing the position description, in light of the board's current skills mix and its future focus
  • advertising and closing date for applications (if relevant)
  • whether search consultants are to be used
  • the need for consultation with stakeholders
  • whether the Minister wishes to seek nominations from other Ministers, caucus colleagues or stakeholders
  • advising nominating agencies of the skill requirements for the vacancy, so they can suggest suitable candidates (see pages 14 and 15)
  • whether legislation requires a board to include members with specified qualifications or representatives of particular sectors or interest groups. 3
  • the time needed for interviewing and undertaking referee checks
  • the requirements of the Cabinet process (e.g. submissions to the Cabinet Appointments and Honours Committee, and whether the appointment has to be made by the Governor-General (refer Governor-General: Three Types of Appointment, page 34).

Appointments immediately before a general election

Wherever possible, departments should avoid proposing appointees whose terms would conclude immediately before or after a general election. It has been the practice for recent governments to exercise restraint in making significant appointments in the pre-election period - appointments not considered to be significant proceed in the usual way. 4

Departments should also consider including information on upcoming appointments in briefing their responsible Minister after a general election. Further advice can be sought at the appropriate time from the Cabinet Office, or from: www.dpmc.govt.nz/cabinet/circulars.

Abbreviated appointment process

It may not always be possible to follow a full appointment process, for instance in the event of the sudden resignation or death of a member. It also may not be possible or appropriate to contact the proposed appointee before the Minister considers an appointment. In these cases, the Minister's 'certification' of the process followed, as required in the Cabinet paper, must explain the reasons and note that the appointment will be contingent upon the resolution of any outstanding issues.

Getting the right candidate

Every vacancy creates an opportunity to reassess the needs of a board or body, and the skills and experience that will best complement the talents of the other board members. A skills analysis of the members of the board or body alongside future skills requirements should be completed.

Board chairs will be able to reflect their knowledge of the workings of the board, its less formal interactions and relationships, and the technical and personal skills that could make the best contribution to the board's performance. Where possible, board chairs should be consulted for their perspective on:

  • the functioning and skills of the board or body
  • where the board or body might be strengthened
  • resulting position descriptions and competencies required.

Industry groups, voluntary organisations and other stakeholders also may have relevant views to offer. (Refer to the section Information for Candidates below.)

Position description and competencies

Writing position descriptions and board profiles can be used to tailor information and person specifications for each vacancy and reappointment, and to review the need to bring in certain skill sets or to adopt new approaches for the work of a board. This will:

  • give candidates a greater understanding of what is required, before they decide whether to apply for/accept a board appointment
  • provide decision-makers with benchmarks against which to measure the attributes of candidates allowing for skills profiling against competencies required
  • help stakeholders to nominate candidates with relevant skills and experience; and reinforce the principle of appointment on merit.

Identifying possible candidates

Potential candidates to boards can be identified in various ways, including advertising, the use of search consultants, nominations by interest groups or MPs, seeking suggestions from current chairs and board members, self-nomination (e.g. people interested in District Health Board membership can place their names on the Ministry of Health's database), or from community and professional networks.

Departments that maintain their own schedules of people who are interested in board appointments need to check regularly that the information is accurate and that those on the database remain interested and available.

Where nomination of a representative of a particular organisation or community is involved, rather than an application process, officials should obtain the Minister's agreement before exploring a candidate's availability.

Departments must manage nominees' expectations carefully, so there is no implication that they will be appointed. Candidates also should be made aware that a range of factors may have an impact on decision timelines and the final outcome.

There may be no single 'best approach', but Ministers need the assurance that recommendations for appointment are based on the widest possible canvassing of high quality candidates.

Diversity of membership

Cabinet Office circular Government Appointments: Increasing Diversity of Board membership (www.dpmc.govt.nz/cabinet/circulars/co02/16.html) emphasises that the government wishes to see a more diverse range of individuals appointed to government bodies. Cabinet has directed those involved in appointment processes to explore alternative means of finding candidates if existing methods do not produce a suitable balance of individuals for consideration.

The Crown Entities Act specifies that, subject to requirements concerning merit, Ministers making or recommending appointments to boards must take into account the desirability of promoting diversity of membership, to ensure that the work of boards benefits from representation that reflects New Zealand society.

Nomination agencies

Nominating agencies need to be involved in the candidate identification process as they may be able to assist by increasing the size and diversity of the pool of individuals to be considered.

When engaging with nominating agencies, officials should:

  • ask nominating agencies as early as possible to review their databases and put forward suitable candidates. Officials should ideally contact nominating agencies at least three weeks before the candidate identification deadline
  • provide nominating agencies with material that sets out the skills and competencies sought, to maximise the chances of obtaining suitable nominations
  • help nominating agencies to keep their database material current by advising if their nominees have been successful or, with the permission of new appointees, providing diversity information back to the nominating agency with an interest in that data.

When professional bodies or other organisations are entitled to nominate a member for a board, the department concerned should encourage them to take account of the benefits of diversity when providing nominations.

The table below has information on each nominating agency:

Nominating Agencies

Services

Ministry of Women's Affairs - Nominations Service

(http://mwa.govt.nz/all-about-boards)

A professional search service which provides women candidates who best meet the criteria specified by the agency responsible for appointments. The Service:

  • Ÿ accesses an up-to-date database of over 3000 women from all sectors and professions. Recruits and refreshes database on an ongoing basis.
  • Ÿ provides short biographies with up-to-date curriculum vitae and contact details, which are easily transposed into the CAB 50/01 forms that accompany appointments papers
  • Ÿ confirms the availability of nominees where this is desirable. Nominees' expectations are carefully managed
  • Ÿ gathers and distributes statistics on women's participation on State sector boards and committees
  • Ÿ provides women candidates with governance advice through website and my board strengths, (www.mwa.govt.nz/women-on-boards/assessment) an online governance self-assessment and development tool, which identifies governance roles for which individual women may be suitable and provides advice on next steps to pursue those roles.

Te Puni Kōkiri (Ministry of - Development) - Governance and Appointments Unit

(www.tpk.govt.nz/en/services/governance/ )

  • Ÿ promotes on participation on statutory boards, committees and advisory groups, particularly those playing a role in New Zealand's social and economic development
  • Ÿ a database and nominations service
  • Ÿ aims to develop and maintain relationships with key and community and industry/sector organisations

Ministry of Pacific Island Affairs

(www.mpia.govt.nz/board-nominations )

 

  • Ÿ promotes Pacific representation on statutory boards, committees and advisory groups; and grow Pacific leadership capacity for nominations to those entities whose decisions have an impact on Pacific people
  • Ÿ a database of Pacific candidates and a small nominations service
  • Ÿ promotes the nominations service through MPIA e-newsletters, MPIA Leo Pasifika publication, MPIA website/Facebook and Pacific media networks

Office of Ethnic Affairs, Department of Internal Affairs

(http://ethnicaffairs.govt.nz/story/nominations-service)

 

  • Ÿ promotes participation by ethnic New Zealanders on statutory boards, committees and advisory groups, particularly those playing a role in New Zealand's social and economic development
  • Ÿ provides a nominations service and a database of potential candidates
  • Ÿ identifies, works with, and manages the expectations of nominees to produce credible applications to appointment opportunities, and
  • Ÿ promotes building of leadership capacity in New Zealand's ethnic communities

 

Nominating Agencies

Services

Ministry of Consumer Affairs

(www.consumeraffairs.govt.nz/about-mca/consumer-representation)

  • Ÿ Guidelines for Consumer Representation for Officials and Chairpersons to identify the purpose and value of consumer representation, and ways to deal with difficulties which consumer representatives may encounter
  • Ÿ a nominations group to identify people who meet the requirements for board positions and proposes nominations.

Office for Disabilities Issues, Ministry of Social Development

(www.odi.govt.nz/leaders-achievers/nominations-service/index.html )

  • Ÿ extensive links with people with disabilities
  • Ÿ downloadable application forms
  • Ÿ a database of people with disabilities who might be appropriate for nomination to boards.

The Commercial Operations group of the Treasury (formerly COMU)

The Commercial Operations group is responsible for coordinating appointments to boards of State-owned enterprises, Crown entity companies and some statutory Crown entities.  Commercial Operations operates a Centre of Monitoring Expertise which provides advice and expertise on monitoring and appointments matters. It maintains a substantial database of names, and will consider requests for access to that information from departments that are responsible for managing Crown entity board appointments. It encourages anyone who believes they have the skills and experience to become a board member to express an interest at www.boardappointments.co.nz. Other information about the Commercial Operations group, along with key processes and documents, is available at www.treasury.govt.nz/commercial/.

Overseas candidates

Sometimes the particular expertise needed by a board justifies consideration of overseas-based candidates. In such a case, care should be taken to: check information on their qualifications and interests; ensure they understand the wider New Zealand 'cultural' landscape within which the board operates; clarify such matters as reimbursement of expenses; and find the most cost-effective way of conducting checks and interviews.

Departments and Ministers will want to balance the possible criticism of additional costs that could result from an overseas board appointment, against making sure the board has the best possible range of skills to meet its objectives and vision.

If trans-Tasman bodies become more common this will raise particular issues; for instance, some appointments will be made by consensus or only by one country's Minister. This will increase the complexity of the appointment process. More specific procedures are likely to be developed over time.

Fees and allowances for trans-Tasman bodies should be discussed on a case-by-case basis with the State Services Commission (see Chapter 3: Remuneration for members of boards and other bodies).

Who is not eligible for appointment

A public servant's first duty is to their Minister and the government of the day, through their chief executive. A board member's first duty is to work to achieve the outcomes, impacts and objectives of the body or agency. This creates the potential for tension.

Cabinet has agreed, as a general rule, that Ministers should not appoint public servants to statutory boards, nor to boards of State-owned enterprises or Crown entity companies. There may, however, be special circumstances which justify appointment of a public servant, including building board capacity through the participation of suitably qualified women, Pacific and Pacific Island people. Further details can be found in the Cabinet Office circular CO (02) 5 Appointment of Public Servants to Statutory Boards (www.dpmc.govt.nz/cabinet/circulars/co02/5.html).

The Crown Entities Act was accompanied by consequential amendments to a range of Acts that removed all ex officio appointments of public servants from Crown entity boards. Other legislation or establishing documents may do this as well for other appointments. Section 30 of the Crown Entities Act sets out other elements that disqualify people from appointment to Crown entity boards. For some entities, the enabling legislation defines additional circumstances that could make a person ineligible for consideration. Officials responsible for appointments need to be familiar with these provisions.

Information for candidates

Appointing departments must provide all candidates and nominees with information about the board in which a vacancy has arisen. A useful model of the information that should be provided would be:

Person specific information

Generic information

  • Ÿ Role definition.
  • Ÿ Accountabilities.
  • Ÿ Key internal and external relationships.
  • Ÿ Required skills, eg:
    • organisational leadership
    • understanding of effective governance
    • understanding of effective strategy.
  • Ÿ Essential or desirable qualifications (academic, professional, etc).
  • Ÿ Prior experience to be demonstrated.
  • Ÿ Minimum meeting attendance required.
  • Ÿ Involvement outside of formal meetings.
  • Ÿ Personal integrity, e.g. avoidance/management of conflicts of interest.
  • Ÿ Approach needed to contribute effectively to the entity's performance.
  • Ÿ Likely level of fees.

A board chair specification would have a separate and more comprehensive description, to reflect the nature of the position.

  • Ÿ General and specific legislative frameworks under which the board operates.
  • Ÿ Role and functions of the board.
  • Ÿ Operating and sector context.
  • Ÿ Key external relationships, e.g. Minister, monitoring department, representative bodies, board chief executive and other staff.
  • Ÿ Unique nature of being part of the State Services; the obligations and responsibilities it entails.

 

Without this information, it will be difficult for candidates to make an informed judgement about the skills and commitment required of an effective board member, as well as of the potential areas of concern such as possible conflict of interest.

For a successful candidate, this initial contact will act as the start of their induction programme; its quality and style will set the tone for the ongoing relationship.

Information from candidates

Departments should make it clear to the candidate/nominee what information he or she needs to provide, and why it is important for the information to be accurate, up to date and complete.

Relevant information should be sought from all candidates/nominees, including proof of their academic qualifications and current employment. The candidate should supply supporting information about their skills, qualifications, relevant background experience, and availability. Information that will enable a judgement to be made about potential conflicts of interest must also be sought.

To avoid the possibility of future embarrassment, candidates must be asked whether there is anything in their personal histories that may make their appointment inappropriate or that would create the perception of being inappropriate. Candidates also need to be clear that once appointed to a board, they cannot let advocacy of particular interests override or undermine their governance duties as members of the board.

Candidates also should be asked for information on any existing directorships and other major work commitments. If a candidate reaches the short-list, they could be asked if they are currently being considered for other State sector board appointments.

Holding another appointment certainly does not disqualify someone from consideration, as real value can result from 'cross fertilisation' of ideas and experience, and the particular skills required may be in short supply. However, a balance needs to be struck between demonstrated capability, having sufficient time to do justice to the work of the board concerned, and managing any conflicts of interest.

Formal consent to being appointed

Before an appointment can be made to a Crown entity board, the person concerned must consent in writing to being a member, certifying that he/she is not disqualified under any provisions of the Crown Entities Act or any other relevant provisions, and disclosing to the responsible Minister the nature and extent of all interests he/she has or is likely to have in matters relating to the entity. This confirmation should be obtained in time to be noted in the Cabinet Appointments and Honours Committee submission regarding the appointment.

Formal consent should also be obtained for other types of appointments. At what stage this occurs during the appointment process can be dependent on the requirements of legislation or other appointment "documents" or "rules".

Collection, storage, release and disposal of personal information

Departments should have specific protocols on handling personal information collected for board appointment procedures, which must reflect legislation on privacy and official information.

Privacy Act 1993

Relevant principles of the Privacy Act include:

  • Principle 2: personal information must be collected from the individual concerned.
  • Principle 5: an agency holding personal information is required to protect it against loss, unauthorised access or misuse.
  • Principle 9: an agency that holds personal information shall not keep it any longer than is required for the purposes for which the information may lawfully be used (for instance, the possibility of Judicial Review).
  • Principle 10: an agency that holds personal information obtained in connection with one purpose shall not use it for any other purpose, unless it has reasonable grounds to do so.
  • Principle 11: limits the disclosure of personal information to other persons or agencies.

People are entitled to have access to their own personal information held by a department, and to request correction of that personal information.

Official Information Act 1982

Official Information Act requests may be made for information on nominations, appointees, remuneration, etc. If this happens, the department concerned needs to carefully balance the public interest, the privacy of the individuals concerned, and the need to maintain the credibility of statutory appointment processes.

Interests, conflicts and other due diligence checks

To maintain the confidence of the Government and the public, boards and other bodies must conduct their affairs impartially and be seen to be doing so. It is essential that any interests are made known, so that the potential for a conflict of interest can be assessed in advance of an appointment being made. Public and political trust in the soundness of a board's decision-making or advice will be severely compromised if appointments are found not to have been made on appropriate grounds, or if the necessary checks have not been made.

Further guidance on the management of interests and conflicts can be found on the Office of the Auditor-General web site: Managing conflicts of interest: Guidance for public entities, refer www.oag.govt.nz/2007/conflicts-public-entities/.

The importance of declaring interests

An interest arises where a person has a financial, familial or other personal interest in a matter that could give rise to bias or the appearance of bias in the work of an agency. There are many aspects to be considered, including:

  • what comprises an 'interest'
  • the obligation under legislation e.g. the Crown Entities Act requires appointees to register details of interests in respect of the individual and of family members
  • reviewing/checking of disclosure statements
  • how a conflict of interest can impact on the quality of a board's decision-making, and on its integrity and reputation
  • providing assurance to Ministers that conflicts can be managed if an appointment proceeds
  • the need to protect personal information provided.

New Zealand's comparatively small population and the limited number of people who possess particular combinations of skills and experience, mean it is always possible that the question of interests will arise. This will tend to put a focus on identifying and managing interests, rather than disqualifying all those who have interests.

Declaring interests

Candidates for all positions must be asked to declare relevant interests. Candidates for Crown entity boards are required to identify whether they (or a partner, child or other close family member or friend) have or are likely to have any financial, personal or professional interests that might create a conflict if they were to be appointed. Departments need to realise that potential appointees:

  • may be reluctant to disclose details of personal finances, or to disclose interests that might be commercially sensitive
  • could have difficulty in, or be unwilling to, seek personal information on the financial situation or dealings of family members
  • may not know enough about a Crown entity's business and operations to realise what could constitute an interest
  • may not appreciate the significance of making (or not making) a full disclosure.

These enquiries need to be handled in a diplomatic way, but not avoided.

Departments need to put requests for disclosure of interests into a practical context, and try to ensure that all prospective appointees appreciate the significance of the request. Recent examples have indicated the importance of appointees being fully aware of the implications and perceptions surrounding interests and the need for active management of conflicts if appointed. Departments should advise candidates that the information they disclose will be forwarded to that board and/or body if the candidate is appointed.

Considering interests

Before any appointment or reappointment is made to a board, Ministers need to be confident that, where interests can be identified:

  • their value is assessed and a disclosure made
  • the candidate will be able to make an effective contribution, even if their interests mean they cannot participate in an activity of the entity that relates to a particular matter and/or
  • measures can be put in place to manage conflicts, so that a reasonable person would not perceive any unacceptable influence on the entity's business.

When considering potential appointees to a board, interests fall under one of two categories:

  • a manageable interest, which can be avoided or managed through an appropriate mechanism. This could be an agreement by the member to divest the interest (e.g. selling shares or putting them into a trust arrangement - see the paragraphs on Direct Financial Benefit on the next page), to sever the connection that causes the interest (e.g. relinquishing membership of an organisation), or a mutual decision that the interest affects only a narrow part of the board's operations; or
  • an unmanageable interest, which arises if the interest is unavoidable and cannot be managed through an appropriate mechanism; for instance where the member cannot or will not divest him/herself of the interest, or the interest affects so many of the board's activities that management mechanisms would not be practicable. Where this situation arises prior to appointment, it would not be possible to give the Minister the necessary assurances about avoidance of conflicts and it is unlikely that an appointment should proceed.

The department should critically consider the information provided and seek additional information where questions or concerns arise, such as:

  • is the declared interest likely to limit the candidate's contribution to the work of the board so much that the appointment should not proceed?
  • is the department confident that the board has robust mechanisms for managing and recording declared interests, and for precluding access to information on and participation in matters relating to those interests?

Board members must ensure they perform all aspects of their work impartially, by:

  • avoiding any situation where actions they take in an official capacity could be seen to influence or be influenced by their private interests (e.g. company directorships, shareholdings, financial rewards)
  • avoiding situations that could impair objectivity or create personal bias that would influence their judgements
  • ensuring they are free from any obligation to another party.

Keeping interests under review

It is important for those undertaking appointments to remind candidates that interests are not a matter to be dealt with only at appointment. At the time of consideration for appointment, and throughout a member's term of office, actual and perceived conflicts of interest must be borne in mind as interests, conflicts, and context can change. Interests held by a member's family as well as the member personally may change over time, as will the issues with which a board or body deals with. All boards are expected to have a register where interests are recorded. All board members need to review their interests regularly and add or remove them from the register as soon as the circumstances require it.

Crown entity board members have a collective obligation to be aware of their colleagues' interests. A board must notify the responsible Minister if it becomes aware that a member has not disclosed an interest, or has taken part in board discussions or decisions despite having an interest in a matter. A board member who fails to disclose a known interest is likely to breach the duties of acting in good faith and honestly, which is a basis for removing a member.

Making judgements about an interest: Illustrations

The following illustrations, from an appointed Crown entity member perspective, may help determine whether a person is interested. In the case of any doubt the presumption should be that the person has an interest.

Direct Financial Benefit

Subject to the statutory exceptions, any direct financial benefit is a conflict of interest that must be disclosed and managed. Generally, members must not seek to provide paid services to an entity other than through their role as a board member. They must not be involved in developing, supporting or advising on any matter considered by the entity.

A shareholding or other financial investment in a company engaged with the agency is a direct financial benefit and is therefore an interest, unless it meets the 'insignificance' exception. Many entities make decisions that can affect the value of a financial investment, so the potential for any increase in a member's interest must be considered when assessing insignificance.

Placing an interest in a blind trust is not of itself sufficient to avoid that interest. Where a member has recently placed an interest into a blind trust there is unlikely to be sufficient remoteness established to avoid what would otherwise be an interest. The perception will remain that the member has an interest which could influence decision-making unless a professional trustee, otherwise unconnected with the member, is appointed with the power to trade trust assets.

Family Members' Financial Interest

A distinction is drawn in the Crown Entities Act between immediate family members and other wider family connections. Section 62(2)(b) (www.legislation.govt.nz/act/public/2004/0115/latest/DLM329995.html) provides that an interest will arise through a spouse, civil union partner, de facto partner, child, or parent of a person who may derive a financial benefit from the matter. The Act requires that these interests be regarded in the same way as financial benefits of a member. Where the member, acting diligently and in good faith, is not aware of any financial involvement of a wider family member then the board member is unlikely to be interested, as the involvement would not be reasonably regarded as likely to influence the member's responsibilities with the entity.

Financial Interest in other Persons

The Crown Entities Act provides that a financial interest in another person may give rise to an interest, because of an apprehension of influence. This might include an employment relationship or engagement in a professional capacity with a party dealing with the entity or with someone else who may be materially affected by a decision.

For instance, a family member might be involved in acting for someone dealing with an entity, as a partner or employee of a law firm representing the party. In that situation the involvement may be regarded as too remote or insignificant to be likely to influence the carrying out of entity activities. The position may be different if the family member prepares material for consideration by the entity itself, or appears before the board member. In those cases, the latter may be reasonably regarded or perceived as likely to be influenced.

Section 62(2)(d) (www.legislation.govt.nz/act/public/2004/0115/latest/DLM329995.html) of the Crown Entities Act provides that an interest arises when a member is 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. Whether it comprises an interest depends on whether matters are so remote or insignificant as not to be reasonably regarded as likely to influence decision-making.

Exercising judgement on issues of perceived remoteness and insignificance is essential. For example, a member may be a trustee or director of an investment business. One of its investments may be with a party dealing with the entity. As the investment business will have a financial interest in the participant, the member as an officer of the investment business is probably interested.

Other interests

Interests are not limited to financial matters (section 62(2)(f)) (www.legislation.govt.nz/act/public/2004/0115/latest/DLM329995.html). A personal, non-financial interest in a matter before the agency may include:

Family Members - Any family connection could give rise to an interest where there is a reasonable apprehension of bias, e.g. a member could have a close relative who is personally interested other than by way of a financial interest.

Friendship - Members may have an interest in matters affecting the interests of close friends. Close and reasonably long-standing relationships with demonstrable intimacy are likely to create strong perceptions of interest.

Acquaintance - General acquaintances are not likely to give rise to an interest. Involvement in professional or sporting associations with people interested in a party dealing with the entity would rarely create an interest. Overlapping directorships or similar interests could, however, mean a member is interested, especially where relationships are long-term or close collegiality has developed. Where a member has acted as an advocate, adviser or material witness in a matter, or a member's business partner has done so, and the matter is being considered by the entity or relates to a matter it is considering, the member is likely to be seen as having an interest.

Prior Business Relationships - Where someone had a close association with a business for a significant period before becoming a board member, there may well be a strong perception of an interest for at least six months after ending all associations. There is no set time period which establishes remoteness, but ending a long business relationship is unlikely to immediately make that interest so remote as to be irrelevant.

Pre-judgement - Pre-judgement of issues would exclude a member from participation in a matter before the entity. Having a definite point of view about a question of law or legislative interpretation of a policy is not sufficient to give rise to an interest, nor is prior knowledge of circumstances which are in issue. However, a publicly-stated opinion on those facts could raise issues of apparent pre-judgement.

Other due diligence checks

Departments should undertake other due diligence checks appropriate to the requirements of the vacancy being filled and any risks. The broader the check being undertaken and particularly if overseas information is required, the more likely the need will be for departments to engage a specialist firm to undertake the checks.

To assess whether checks in addition to interest and conflicts are required, some key questions are:

  • What qualification or experience must any candidate have, without which they would be ineligible for appointment?
  • What questions does the department have based on interactions with the applicant?
  • What is the sphere of influence the role has on the board or body?
  • Does the role involve responsibility for substantial public assets or funds?
  • What is the experience required of candidates?
  • What is the reach or impact of the entity's decisions on groups of people or sectors/s of society?

Some possible due diligence checks:

  • Referee checks: referee checks can verify dates, duties, and experience. Confirm honesty and integrity. Substantiate or explore strengths and weaknesses. Give insights into attitudes, personality style and working style
  • Educational qualification checks: if the role requires the person to have a particular level of qualification or hold a particular certificate (i.e. a practising certificate) these should be checked with the appropriate institution
  • Other qualifications: one avenue is to search the Companies Office website to check directorship, including banned directors www.business.govt.nz/companies
  • Criminal checks: some boards and bodies will have criteria that make people with certain criminal convictions ineligible for appointment. The Ministry of Justice Criminal Records Unit can undertake a check on any criminal records in the New Zealand Courts System (it does not deal with overseas offences). The timeframe is within 20 days, though genuinely urgent requests can be handled more quickly. It may be appropriate to make an appointment subject to the criminal check being completed. Further information, including forms, is available from www.justice.govt.nz/services/criminal-records
  • Financial checks: one avenue is to use the publicly available Insolvency Register www.insolvency.govt.nz/cms
  • A candidate's online profile may also be checked.

Departments must secure the agreement of the nominee/applicant before undertaking referee, educational and criminal checks where the information is not already publicly available. If consent is not given any recommendation to appoint may need to be reconsidered.

Deciding on Who is to be Appointed

Short-listing candidates

When candidates are short-listed, there is a further opportunity for checking curriculum vitae and disclosures of interest, to seek any additional information, e.g. referee, probity or security checks, and to ensure that an eventual appointment cannot be criticised on procedural grounds. The potential for conflicts of interest should be analysed at this stage.

Attention also should be paid to relevant skills that have been gained through non-traditional career streams, e.g. communication and negotiation skills, political sensitivity, demonstrated ability to think strategically

Interviews

Interviews should be handled in a consistent way and against clear criteria, so that fair comparisons can be made of all short-listed candidates. Where possible, the chair should be involved. Departments should assemble an interview panel that matches the requirements of the board or body and the particular board vacancy. The membership of the panel for an appointment should remain the same, unless exceptional circumstances arise. An objective record needs to be kept of all interviews.

Interviews also are a good way to share information on the complexities of working in the State sector and to gauge the depth of the candidate's understanding of the duties of a board member, including the importance of good governance of the Crown's interests. The panel also must give a candidate the chance to respond to any concerns raised by their declaration of interests or by any external checks.

Departments may reimburse the actual and reasonable costs met by applicants attending interviews, on a case-by-case basis.


3: Once a board member is appointed, then they should not let advocacy of particular interests override or undermine their governance responsibilities or duties as members. While they may bring an industry or representational lens to their role, informed by their particular knowledge and experience, they must not advocate to the detriment of good governance.

4: The term 'significant' is not defined; it is a matter of judgement. A case-by-case assessment is required, considering such factors as: the public profile of the entity, whether the entity has a strategic or decision-making role, whether the entity controls significant assets or funds, and whether the entity is an executive agency (as opposed to an advisory or technical body).

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