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Council Controlled
Organisations Governance and Monitoring Committee
03 February
2015
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Governance
Review for Auckland Council's Council Controlled Organisations (CCOs)
File No.: CP2014/18749
Purpose
1. To review and make decisions to
the governance and policy documents for Auckland Council’s Council Controlled
Organisations (CCOs).
2. To review specific sections from
the Board Appointment and Remuneration policy and the Shareholder Expectation
Guide (under development as the Governance Manual). Documents are available at http://www.aucklandcouncil.govt.nz/EN/AboutCouncil/representativesbodies/CCO/Pages/Home.aspx.
Executive
summary
3. The council is required, under
section 57 of the Local Government Act 2002 (LGA 2002), to adopt a policy
setting out an objective and transparent process for appointing and
remunerating directors and reviewing the performance of council organisations.
This report provides an overview of the recommended changes to the council’s
policy of appointing and remunerating directors.
4. The CCO Review has reviewed the
way in which Auckland Council undertakes its governance programme. The key
areas for improvement are:
Board Appointment & Remuneration recommended policy
(a) New appointments:
(i) a Nomination Panel, made up
of the Chief Executive of Auckland Council, Mayoral Chief of staff, Chair of
the CCO, an independent governance professional and an IMSB member. The
Nomination Panel is responsible for short-listing the candidates.
(ii) an Interview Panel, made up
of the Chief Executive of Auckland Council, Chair or Deputy Chair of the CCO
Governance and Monitoring Committee, Chair of the CCO, an independent
governance professional and an IMSB member. The Interview Panel is responsible
for interviewing up to three candidates and recommending the preferred
candidate to the CCO Governance and Monitoring Committee for approval.
(b) Fee Setting for board members to
be amended from an annual review to once every triennium following council
elections.
(c) Cross-pollination of directors
would ensure better utilisation of director skills and expertise and encourage
alignment among complimentary CCOs (e.g. Regional Facilities Auckland and
ATEED).
(d) The appointment and remuneration
of a CCO Chief Executive requires prior discussion with the Nomination Panel.
(e) In exceptional circumstances the
Auckland Council’s Chief Executive and his or her representative can be
appointed to a CCO board
(f) Council employees would not be
remunerated if they serve as a director of a CCO as the role is deemed to be
part of the employees normal duties
(g) Elected members will be
ineligible to serve as a director of a CCO
(h) Incorporate a new section on
Board Observers of substantive CCOs detailing the scholarship programme and the
potential pathways for those successful candidates competing the programme
Governance Manual (formerly Shareholder Expectation
Guide)
(a) Board Performance review: a
board-led review to be undertaken by the Chair once every triennium and on
completion notification to the CCO Governance & Monitoring Committee
Recommendations
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That
the Council Controlled Organisations Governance and Monitoring Committee:
a) agree the proposed changes to
the Board Appointment and Remuneration policy including:
i) amending Section 4.4.2 : New
Appointments
1.1 a Nomination Panel, made up of
the Chief Executive of Auckland Council, Mayoral Chief of staff, Chair of the
CCO, an independent governance professional and an IMSB member. The
Nomination Panel is responsible for short-listing the candidates
1.2 an Interview Panel, made up of
the Chief Executive of Auckland Council, Chair or Deputy Chair of the CCO
Governance and Monitoring Committee, Chair of the CCO, an independent
governance professional and an IMSB member. The Interview Panel is
responsible for interviewing up to three candidates and recommending the
preferred candidate to the CCO Governance and Monitoring Committee for
approval
b) agree to amend Section 5.2 Fee
Setting: Board members’ remuneration will be reviewed once per triennium,
following council elections
c) agree to amend Section 4.7.4
Other exclusions: Board members may serve on the board of more than one
substantive CCO where cross-pollination would provide for better utilisation
of director skills and expertise and encourage alignment among complimentary
CCOs (e.g. Regional Facilities Auckland and ATEED)
d) agree to add to Section 4.7.3
Appointment and remuneration of CCO Executives : The appointment and
remuneration of a CCO Chief Executive requires prior discussion with the
Nomination Panel
e) agree to amend Section 4.7.2
Appointment and remuneration of Council Officers : In exceptional
circumstances Auckland Council’s Chief Executive and his or her
representative can be appointed to a CCO board. Council Officers will not be
remunerated if they serve as a director of a CCO as the role is deemed to be
part of the employees normal duties
f) agree to add to Section 4.7.1:
Elected members will be ineligible to serve as a director of a CCO
g) agree to add to Section 6.0
Board Observers : Incorporate a new section detailing the Board observer
(future director) scholarship programme and the potential pathways for those
successful candidates following completing of the programme
h) agree to the proposed changes
to the new Governance Manual (formerly Shareholder Expectation Guide):
i) amend Section 6 Board
Performance Review : a board-led review to be undertaken by the Chair, with
notification on completion to the CCO Governance and Monitoring Committee
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Comments
5. Auckland Council’s CCOs are
responsible for delivering on key strategic objectives for the Auckland
Council.
6. Ensuring the CCO boards are
competently equipped to deliver on their strategic objectives is a key
governance mechanism for the CCO Governance & Monitoring Committee.
7. The Board Appointment and
Remuneration policy and Governance Manual (under development, formerly
Shareholder Expectation Guide) are two key policy documents that guide both the
Council and the CCOs.
8. The two policy documents have
been reviewed in the following areas : board appointments, remuneration,
performance review, appointment and remuneration of staff and remuneration of
elected members.
9. A desk-top review of similar
policy documents and information from Nick Hill[1] has been provided
to councillors for their information.
10. With a view to developing and
implementing a best-practice approach to the critieria outlined in paragraph 8,
staff recommend the following amendments outlined in the tables below.
Board Appointment &
Remuneration policy (the policy)
11. The policy was initially adopted
in February 2011, with an in-depth review completed in December 2011, and a
minor review in 2013.
12. The CCO Governance &
Monitoring Committee agreed to incorporate a governance review into the Working
Better Together work stream of the CCO Review.
13. The amendments to the Board
appointment and remuneration policy are summarised below.
Appointment Policy
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Issue
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Current policy
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Amendment to the policy
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Benefits
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Board
appointments : shortlisting
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Undertaken by
CCO Governance & Monitoring Committee
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Nomination Panel
made of up
- Chief Executive of Auckland Council
- Mayoral Chief of Staff
- CCO Chair
- An independent governance professional
- An IMSB member
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Continuity of
membership of the Nomination Panel will bring
- Greater focus on succession planning
- Greater focus on complimentary skill mix on boards
(reducing duplication of skills and better utilisation of directors
expertise)
Other benefits
- Greater responsibility on the Nomination Panel (and
Recruitment Agency) to identify quality directors and increase “diversity of
thought” on board
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Board
appointments : interviewing
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Undertaken by
CCO Governance & Monitoring Committee
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Interview Panel
made up of
- Chief Executive of Auckland Council
- Chair or Deputy Chair of CCO Governance &
Monitoring Committee
- CCO Chair
- An independent governance professional
- An IMSB member
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Continuity of
membership of the Interview Panel will bring
- Greater focus on succession planning
- Greater focus on complimentary skill mix on boards
(reducing duplication of skills and better utilisation of directors
expertise)
Other benefits
- Frees up councilors time commitments and committee
timeline
- Ensures an appropriate mix of political oversight
and independent governance advice
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Other Policy Amendments
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Issue
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Current policy
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Amendment to the policy
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Benefits
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Remuneration
Review
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Alternates between
a full review to assess whether board remuneration is appropriate and market
movement
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Full review
following council elections (one only per triennium)
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- Is consistent with current practices of other
councils (WCC, TCC, CCC)
- Is consistent with central government approach
- Gives confidence to directors that remuneration is
appropriately reviewed triennially
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Cross-pollination
of directors
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Board members
may not serve on the board of more than one substantive CCO
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Board members
may serve on the board of more than one CCO
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- Would encourage greater alignment between
complimentary CCOs ( e.g. RFA and ATEED)
- Better utilisation of directors skills and expertise
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Appointment and
remuneration of CCO Chief Executive
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Silent
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Requires prior
discussion with the Nomination Panel
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- Opportunity to assist CCOs with executive
appointments
- Ensures CCOs are cognisant of Auckland Council’s
executive remuneration policy
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Council staff on
CCO Board
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Council officers
are ineligible to serve as a director on a substantive CCO
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In exceptional
circumstances the appointment of Auckland Council’s Chief Executive and his
or her representative
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- Council risk is reduced if board appointment to a
CCO is required (only in exceptional circumstances)
- Amends the Board Appointment & Remuneration
policy to align with current CCO Constitutions (as reviewed in June 2012)[2]
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Remuneration for
council staff
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Silent
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No remuneration
for council staff
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- Is consistent with current practices of other
councils (WCC, TCC CCC)
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Elected members
on CCO Board
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Ineligible with
the exception of Auckland Transport
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Elected members
ineligible
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- Best practice would be to not have elected members
on CCO Boards due to the inherent conflict of interest
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Board Observers
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Silent
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Board Observer
(Future Directors Programme) incorporated into the policy)
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- Updates the policy to reflect current practices
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Governance Manual (formerly
Shareholder Expectation Guide)
14. The amendments to the Governance
Manual are summarised in Table 2 below.
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Issue
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Current policy
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Amendment to the policy
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Benefits
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Board
Performance Review
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Alternates
between Shareholder review and board-led review (18months)
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Board-led review
with notification to the CCO Governance & Monitoring Committee on
completion highlighting any high-level/critical areas for concern, if any.
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Ongoing
Monitoring : CCO Review
(Working Better Together) will implement new mechanisms to provide confidence
to the council that CCOs are responsive to shareholders expectations.
Mechanisms
include
- adequate level of in-depth monitoring through
quarterly reporting programme
- audit and risk analysis
- communication and collaboration
- key relationships
- as required strategic review
Board-led
review : CCO Chair can
share relevant information with the council (and Nomination Panel) to ensure
skill-gaps and expertise requirements are adequately represented around the
board table
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Consideration
Local
board views and implications
15. Under section 57 of the Local
Government Act 2002 (LGA 2002), adopting a policy that sets out an objective
and transparent process for appointing and remunerating directors and reviewing
the performance of council organisations is the role of the governing body.
Māori
impact statement
16. The recommended amendments to the
policy incorporating IMSB representation on the Nomination and Interview Panels
reflect the outcomes recommended in the IMSB Schedule of Issues of
Significance, Principle Four : Partnership, by
i) assisting IMSB to build
robust and meaningful relationships with CCOs at a decision-making level
(Action 7.6); and
ii) advocating and
assisting with the appointment of more Maori directors on boards of CCOs
(Action 7.8).
Implementation
17. The CCO Governance & External
Partnerships will implement the recommendations from this committee to amend
the Board Appointment and Remuneration policy and Governance Manual. The CCOs
will be advised of amendments to the policy documents.
Attachments
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No.
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Title
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Page
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aView
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Martin Jenkins Advice
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11
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Signatories
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Authors
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Josie Meuli - Senior Advisor
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Authorisers
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John Bishop - Treasurer and Manager CCO Governance
& External Partnerships
Stephen Town - Chief Executive
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