Te Aratohu mō te Kopou me te Whakauru Mema PoariGuide: Board Appointment and Induction Guidelines (BAIG)
Te whakarite kopoungaPlanning appointments
Te kimi kaitonoRecruiting candidates
Te aromatawai kaitonoAssessing candidates
Te mātai i te takengaChecking background
Te whakatau i te utuSetting remuneration
Te matatapu me ngā paerewaPrivacy principles
Te kopou kaitonoAppointing candidates
Te whakauru kaitonoInducting appointees
Te horopaki ā-tureLegislative background
The background checking table
Information from candidates
Departments should make it clear to the candidate or nominee what information they need to provide, and why it’s important for the information to be accurate, up to date, and complete.
Relevant information should be sought from all candidates and 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. This is covered in more detail in the Interests and conflicts section.
When candidates are short-listed, there’s 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).
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 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 board vacancy, ensuring a mix of gender. 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 public 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.
Interests and conflicts
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’s 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 may 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: A guide for the public sector. The Commission website provides Model Standards for which outlines minimum expectations to support effective reporting and management of conflicts of interest.
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 or where privileged information gained through membership of the board could be used for personal gain. There are many aspects to be considered, including:
- what is 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 and 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 those conflicts can be managed if an appointment proceeds
- the need to protect personal information
New Zealand’s comparatively small population and the limited number of people who possess combinations of skills and experience mean it’s always possible that the question of interests will arise. This will tend to put a focus on identifying and managing interests, rather than necessarily disqualifying all those who have 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 those 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
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. There are examples which 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.
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
- 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 or opportunity for personal gain.
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 Direct financial benefit)
- to sever the connection that causes the interest (e.g. relinquishing membership of an organisation)
- to come to a mutual decision that the interest affects only a narrow part of the board’s operations
- to recuse themselves from information, conversations, and decisions that may be advantageous to their interest.
- 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 themselves of the interest, or the interest affects so many of the board’s activities that management mechanisms wouldn’t be practicable. Where this situation arises prior to appointment, it wouldn’t be possible to give the minister the necessary assurances about avoidance of conflicts, and it’s unlikely that an appointment would 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 or information they receive could be seen to benefit 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
Keeping interests under review
It’s 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 received information or 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
The following situations, 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 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) 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 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) 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.
Interests are not limited to financial matters (section 62(2)(f)). A personal, nonfinancial 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. However, overlapping directorships or similar interests could 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’s 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’s no set time period that 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-
- The Office of the Auditor-General's Guidance on managing conflicts of interest (3.21) notes that “Some cultures, including Māori culture, have a broad concept of family. In our view, a conflict of interest will not often arise where the connection is a common ancestor, such as another iwi or hapū member. Sometimes an iwi connection could create a conflict of interest in and of itself. For example, if the person is working for a public organisation on a Treaty settlement where they are likely to end up as a beneficiary, this might create a conflict of In this situation, the interest is personal.”