11 June 2018

Crown entity boards will usually employ a chief executive, and will delegate to him/her responsibility for the management of the entity and the employment of other staff. Entities have obligations as employers; these are set out in the Crown Entities Act 2004 (CE Act) and other legislation, and in government statements.

Chief executive employment

The employment of a chief executive is one of the most important things that a board does. The board should ensure that a robust process is followed in preparing the position description, seeking suitable candidates and selecting the chief executive.

Under s. 117 of the CE Act, an entity that employs a chief executive must consult with the State Services Commissioner (usually via the board chair or the remuneration committee of the board) before agreeing to or subsequently amending the terms and conditions of employment, including remuneration. The board must have regard to any recommendation that the Commissioner makes to it. If the proposed terms and conditions do not comply with the Commissioner's guidance, the entity must consult the responsible Minister and have regard to any recommendations made by that Minister.

The State Services Commission has model agreements which contain the standard terms and conditions for chief executives of Crown entities. Use of these model agreements is not mandatory but their use, at least as a starting point, is recommended because they incorporate good legal practice, manage risk, and are likely to make the consultation process smoother. The model agreements can be tailored to the requirements of the particular entity. They are available at  publicservice.govt.nz/model_agreements/.

Chief executive performance management

Good practice in relation to chief executive performance management includes:

  • the board defining the performance expectations of the chief executive (including stretch targets), and the criteria against which the chief executive's performance will be measured;
  • ongoing and constructive discussions between the chair and the chief executive;
  • addressing problems early, for instance by the chair communicating and discussing non-performance concerns; and
  • a formal performance evaluation process, managed by the board chair.

Employer responsibilities

The chief executive of statutory Crown entities should employ all other staff of an entity on behalf of the board and would then be responsible for directing their work. Boards need to delegate the appropriate level of authority to the chief executive to manage all operational matters (see the chapter on Delegations). The board has overall responsibility for the entity meeting its employment obligations.

Good employer

If a Crown entity employs staff, s. 118 of the CE Act requires it to operate a personnel policy that complies with the principle of being a good employer. These principles include provisions requiring: 

  • good and safe working conditions;
  • an equal opportunities programme;
  • impartial selection of suitably qualified people for appointment; and
  • recognition of the aims and aspirations of Māori, and of the employment requirements of Māori, women and people with disabilities.

The Equal Employment Opportunities Commissioner at the Human Rights Commission has responsibility for issuing good employer and EEO guidance to Crown entities. That advice can be found at: www.neon.org.nz/crownentitiesadvice/.

Other legislation may prescribe additional employment codes, for example s. 100 D5 of the Employment Relations Act has a code of practice that applies to the staff of the New Zealand Blood Service as well as other entities in the public health sector.

Standards of integrity and conduct

Standards of Integrity and Conduct is the code of conduct issued by the State Services Commissioner under s. 57 of the State Sector Act 1988. The code has been applied to all staff (but not board members) of statutory Crown entities and Crown entity companies, and to board members and staff of some subsidiaries of Crown entities. It must be reflected in each entity's internal policies. The Code can be found at: publicservice.govt.nz/code, together with additional guidance on its interpretation and application.

Pay and employment conditions expectations

The Government's expectations for pay and employment conditions in the State sector were revised in July 2012 and extended to apply to all employees (not just those covered by collective agreements) and to all Crown entities. Crown entities are required to take a number of factors into account in setting pay and employment conditions, including:

  • fiscal sustainability and value for money;
  • contributing to the achievement of the entity's strategic business outcomes;
  • fairness to employees and taxpayers; and
  • enhancing productivity and fostering continuous improvement.

The expectations are set out in: publicservice.govt.nz/govt-expectations-pay-employment.

Responsible Ministers will require boards of Crown entities to have regard to these expectations when establishing their pay and employment conditions.

Governance manual content: Crown entities as employers

At a minimum, a good governance manual should cover the provisions of the applicable legislation in respect of:

  • the processes to be followed in appointing an entity's chief executive, setting their performance expectations and formally evaluating his/her performance;
  • the obligation for Crown entities to operate as good employers;
  • where responsibilities lie for the employment of entity staff;
  • the board's role in ensuring that the State Services Commission's code of conduct is promulgated within the entity; and
  • the factors to be taken into account by Crown entities in setting pay and employment conditions.