Legislative framework relating to Crown entity appointments

Officials who are supporting Crown entity appointments need to be familiar with all the legislation that relates to Crown entities, as the legislation provides information relevant to the appointment and induction processes as governance information.

Crown entities are legal entities in their own right, separate from the Crown. Where functions or activities are assigned to a Crown entity, that decision reflects a view that they should be carried out at arm's length from government.

The Crown Entities Act 2004

The Crown Entities Act provides a consistent framework for the establishment, governance and operation of Crown entities. The Act specifically covers board appointments in Part 2 and Schedule 5 (www.legislation.govt.nz/act/public/2004/0115/latest/DLM1992925.html). The Act also clarifies accountability relationships between Crown entities, board members, the Crown, and Parliament. It sits alongside individual entities' establishing legalisation. In the event of conflict, the Crown Entities Act prevails, unless an entity's own Act expressly modifies or negates the provisions of the Crown Entities Act.

Crown entities are classified into one of five categories:

  • Crown entity companies
  • Crown entity subsidiaries
  • School boards of trustees
  • Tertiary education institutions
  • statutory entities (comprising three types - Crown agents, autonomous Crown entities and independent Crown entities)

Statutory entities are further classified under the Crown Entities Act into one of three types:

Board members' collective and individual duties

The collective duties of statutory Crown entity boards are specified in sections 49-52 of the Crown Entities Act. The collective duties of a Crown entity are the board's public duties, which reflect that the board and the entity are part of the State Services. The collective duties are owed to the responsible Minister. The duties are to ensure that the entity:

  • acts consistently with their objectives, functions, Statement of Intent, and Output Agreement (note that the term "Output Agreement" will be replaced by "statement of performance expectations" as from 1 July 2014)
  • performs its functions efficiently and effectively, consistently with the spirit of service to the public, and in collaboration with other public entities, where practicable
  • operates in a financially responsible manner
  • complies with the Crown Entities Act requirements relating to its subsidiaries and other interests.

The individual duties of statutory entity board members are also specified by the Crown Entities Act (se sections 53-57). Board members' individual duties are to:

  • comply with the Crown Entities Act and the entity's enabling legislation
  • act with honesty and integrity, in good faith and not at the expense of the entity's interests
  • avoid disclosing information, except in accordance with the entity's functions as permitted or required by law
  • exercise the care, diligence and skill that a reasonable person would in the same circumstances, taking into account the nature of the entity and of the action, the position of the member and the nature of his or her responsibilities.

Appointing a chief executive

The establishing Acts of most Crown entities do not specifically state whether a chief executive should be appointed, because such entities have the power under the Crown Entities Act to employ staff, including a chief executive. An entity's enabling legislation may prescribe the appointment process for its chief executive, or the process for setting remuneration or other terms and conditions. Crown entity boards have the final responsibility for setting their chief executives' terms and conditions, subject to consultation as specified in section 117 (www.legislation.govt.nz/act/public/2004/0115/latest/DLM330367.html). Any Crown entity that employs a chief executive must consult with the State Services Commissioner before agreeing to any terms of employment for the chief executive. District Health Boards must obtain the consent of the State Services Commissioner to their chief executives' terms and conditions (see Schedule 3 Clause 44 of the New Zealand Public Health and Disability Act 2000) www.legislation.govt.nz/act/public/2000/0091/latest/DLM82519.html?search=ts_act%40bill%40regulation%40deemedreg_Public+Health+and+Disability+Act+2000+_resel_25_a&p=1 .

An entity's establishing legislation

Statutory Crown entities and many other agencies have their own establishing legislation. Departments need to be familiar with legislation covering each Crown entity for which they have appointment and monitoring responsibilities. For example, establishing legislation may provide for the appointment of a chairperson and/or deputy chair. This is a separate status from being a board member, and an enabling Act may require a different person to be responsible for their appointment.

The New Zealand Public Health and Disability Act 2000

This Act establishes District Health Boards, which are all Crown agents, and a number of other Crown entities. It contains specific appointment and induction provisions for DHB boards, in particular differing provisions for elected and ministerially appointed board members. As with other entities' establishing legislation this Act works in tandem with the Crown Entities Act.

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