Agenda of Appointments and Performance Review Committee

TERMS OF REFERENCE

Responsibilities

The Appointments and Performance Review Committee is established to:

1. Review the chief executive’s performance and to recommend to the Governing Body the terms and conditions of the CE’s employment including any performance agreement measures and annual remuneration.

2. Make appointments to Council-Controlled Organisations (CCOs), Council Organisations (COs) and exempt CCOs and COs.

3. Approve policies relating to the appointment of directors and trustees to CCOs and COs.

Powers

All powers necessary to perform the committee’s responsibilities.

Except:

(a) powers that the Governing Body cannot delegate or has retained to itself (section 2)

(b) where the committee’s responsibility is limited to making a recommendation only

Exclusion of the public – who needs to leave the meeting

Members of the public

All members of the public must leave the meeting when the public are excluded unless a resolution is passed permitting a person to remain because their knowledge will assist the meeting.

Those who are not members of the public

General principles

· Access to confidential information is managed on a “need to know” basis where access to the information is required in order for a person to perform their role.

· Those who are not members of the meeting (see list below) must leave unless it is necessary for them to remain and hear the debate in order to perform their role.

· Those who need to be present for one confidential item can remain only for that item and must leave the room for any other confidential items.

· In any case of doubt, the ruling of the chairperson is final.

Members of the meeting

· The members of the meeting remain (all Governing Body members if the meeting is a Governing Body meeting; all members of the committee if the meeting is a committee meeting).

· However, standing orders require that a councillor who has a pecuniary conflict of interest leave the room.

· All councillors have the right to attend any meeting of a committee and councillors who are not members of a committee may remain, subject to any limitations in standing orders.

Independent Māori Statutory Board

· Members of the Independent Māori Statutory Board who are appointed members of the committee remain.

· Independent Māori Statutory Board members and staff remain if this is necessary in order for them to perform their role.

Staff

· All staff supporting the meeting (administrative, senior management) remain.

· Other staff who need to because of their role may remain.

Local Board members

· Local Board members who need to hear the matter being discussed in order to perform their role may remain. This will usually be if the matter affects, or is relevant to, a particular Local Board area.

Council Controlled Organisations

· Representatives of a Council Controlled Organisation can remain only if required to for discussion of a matter relevant to the Council Controlled Organisation.

1 Apologies

At the close of the agenda no apologies had been received.

2 Declaration of Interest

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

3 Confirmation of Minutes

That the Appointments and Performance Review Committee:

a) confirm the ordinary minutes of its meeting, held on Thursday, 7 September 2017, including the confidential section, as a true and correct record.

4 Petitions

At the close of the agenda no requests to present petitions had been received.

5 Public Input

Standing Order 7.7 provides for Public Input. Applications to speak must be made to the Governance Advisor, in writing, no later than one (1) clear working day prior to the meeting and must include the subject matter. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders. A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker.

At the close of the agenda no requests for public input had been received.

6 Local Board Input

Standing Order 6.2 provides for Local Board Input. The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time. The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give one (1) day’s notice of their wish to speak. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.

This right is in addition to the right under Standing Order 6.1 to speak to matters on the agenda.

At the close of the agenda no requests for local board input had been received.

7 Extraordinary Business

Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“An item that is not on the agenda for a meeting may be dealt with at that meeting if-

(a) The local authority by resolution so decides; and

(b) The presiding member explains at the meeting, at a time when it is open to the public,-

(i) The reason why the item is not on the agenda; and

(ii) The reason why the discussion of the item cannot be delayed until a subsequent meeting.”

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“Where an item is not on the agenda for a meeting,-

(a) That item may be discussed at that meeting if-

(i) That item is a minor matter relating to the general business of the local authority; and

(ii) the presiding member explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but

(b) no resolution, decision or recommendation may be made in respect of that item except to refer that item to a subsequent meeting of the local authority for further discussion.”

8 Notices of Motion

There were no notices of motion.

Appointments and Performance Review Committee

25 September 2017

Process for the appointment of new directors to Panuku Development Auckland Limited, Watercare Services Limited, and Auckland Tourism, Events and Economic Development Limited

File No.: CP2017/19210

Purpose

1. To provide an overview and update on the process for the appointment of directors to Panuku Development Auckland Limited (Panuku), Watercare Services Limited (Watercare) and Auckland Tourism, Events and Economic Development Limited (ATEED).

Executive summary

2. At its 29 March 2017 meeting the Appointments and Performance Review Committee made decisions regarding the skills and experience required to fill the vacancies on the boards of ATEED, Watercare and Panuku. The candidate specifications approved included:

· two ATEED directors (one director with knowledge and experience in the tourism industry and one director with strong leadership skills and strategy focus)

· one Watercare director (knowledge and experience in the area of water service technologies and customer engagement)

· one Panuku director (property development experience).

3. At its 7 September 2017 meeting, the Appointments and Performance Review Committee approved the shortlist of candidates to be interviewed for the Watercare and ATEED vacancies. Interview panels have completed their deliberations, and as part of the confidential agenda of this meeting the committee will consider the candidates recommended for appointment for the three vacancies.

4. The nomination panel appointed by this committee has considered the initial list of candidates for the Panuku director vacancy, and the committee is now asked to consider candidates for interview.

Recommendation/s

That the Appointments and Performance Review Committee:

a) note the appointment process for the director vacancies on the boards of Auckland Tourism, Events and Economic Development Limited, Watercare Services Limited, and Panuku Development Auckland Limited

b) note that reports on the confidential agenda will recommend candidates for appointment to the boards of Watercare Services Limited, Auckland Tourism, Events and Economic Development Limited and candidates to be interviewed for the vacancy on the board of Panuku Development Auckland Limited.

Comments

Process - general

5. The process of attracting candidates is systematic and targeted towards likely sources of talent. This is a combined approach including targeted research by council’s recruitment company Kerridge and Partners, while council staff focus on distributing information through:

· council networks

· Auckland iwi organisations

· Auckland Council elected members

· council’s advisory panel members

· relevant central government organisations

· a range of non-government organisations.

6. The general process for appointing directors to any council-controlled organisation board is:

Progress and future decisions

7. The candidate specifications for these appointments are summarised at Attachment A.

8. Progress and future work is summarised in the table below:

Date	Work	Status	Who / Comments
29 March 2017	Approved skills required (vacancies) and the Nomination and Interview panel membership.	Complete	Appointments & Performance Review Committee
July 2017	Candidate search.	Complete	Kerridge & Partners / council
August 2017	Considered the long list of candidates for ATEED (4 August 2017) and one vacancy on Watercare board (7 August 2017).	Complete	ATEED and Watercare Nomination panels
7 September 2017	Approved the shortlist of candidates recommended for interview for ATEED and Watercare vacancies	Complete	Appointments & Performance Review Committee
September 2017	Interviewed shortlisted candidates for ATEED (8 September 2017) and Watercare (13 September 2017). Considered the longlist of candidates for Panuku (28 August 2017).	Complete	ATEED and Watercare Interview panels Panuku Nomination Panel
25 September 2017	Consider the candidates recommended for appointment to the two ATEED vacancies and one Watercare vacancy. Consider the candidates recommended for interview for the single vacancy on Panuku	To be completed	Appointments & Performance Review Committee
15 November 2017	Consider the candidate recommended for appointment to the single Panuku vacancy.	To be completed	Appointments & Performance Review Committee
December 2017 – January 2018	Induction of all new directors.	To be completed	CCO Governance & External Partnerships

Consideration

Local board views and implications

9. Board appointments to the council-controlled organisations are the role of the Governing Body. Local boards are invited to participate in the nomination process by suggesting suitable candidates for consideration.

Māori impact statement

10. Council’s Board Appointment and Remuneration Policy aims to appoint diverse boards. This can have positive impacts for Māori by creating opportunities for Māori directors, and by providing opportunities to have Māori perspectives considered at a governance level within the council group.

11. Iwi organisations in the Auckland region were contacted during the nomination process to suggest suitable candidates for consideration.

12. In line with the Board Appointment and Remuneration Policy, an Independent Māori Statutory Board member was appointed to represent the Independent Māori Statutory Board on the nomination and interview panels.

Implementation

13. Once the resolutions of this committee about the shortlist and board appointments are made, staff will progress the interview process for Panuku in conjunction with Kerridge and Partners and the appropriate correspondence and induction for new directors and directors whose tenure has ended.

Attachments

No.	Title	Page
a ⇩	Candidate Specifications - ATEED, Watercare and Panuku	13

Signatories

Author

Josie Meuli - Senior Advisor

Authorisers

Alastair Cameron - Manager - CCO Governance & External Partnerships

Phil Wilson - Governance Director

Appointments and Performance Review Committee

25 September 2017

Review of the Appointment and Remuneration Policy for Board Members of Council Organisations

File No.: CP2017/19539

Purpose

1. To seek approval for recommended amendments to the Auckland Council Appointment and Remuneration Policy for Board Members of Council Organisations (the policy).

Executive summary

2. The Governing Body at its 23 February 2017 meeting approved the recommended program of work to improve the strategic alignment, accountability and responsiveness of substantive council-controlled organisations (CCOs). (Resolution number GB/2017/17) This included a review of the policy and process for the appointment of board members to council organisations^{^[1]}.

3. Council is required by legislation to have an objective and transparent policy and process for the appointment of directors to council organisations. This report identifies potential improvements to the policy; which have been classified into three areas.

· Structural and editorial improvements: amendments which do not change the meaning of the policy but do improve the logic and flow of the policy, and the readability of and consistency across the policy; which in turn results in enhanced transparency.

· Minor policy changes: proposed amendments which result in minor change to the policy. The report sets out the recommended policy amendment and the rationale for change.

· Substantive policy changes: proposed amendments which result in substantive change to the policy. The report sets out options for change and an analysis of the advantages and disadvantages of each option.

4. A separate report on this agenda makes specific proposals on remuneration for substantive CCO directors. The policy sets out only the high level overview for remuneration, allowing regular review through an agreed methodology.

Recommendation/s

That the Appointments and Performance Review Committee:

a) note that a number of structural and editorial improvements which do not result in any change the meaning of the Auckland Council Appointment and Remuneration Policy for Board Members of Council Organisations (the policy), have been made to the draft revised policy.

b) agree the proposed minor amendments and improvements to the policy as set out in attachment A and B, that cover:

i) definitions and objectives of the policy

ii) clarity on the considerations for appointments

iii) remuneration of board members nominated by the New Zealand Transport Agency

iv) appointments to multiply owned council-controlled organisations

v) non-eligibility of disqualified directors

vi) a requirement for board members to have formal governance training or have the requisite governance experience

vii) the additional competencies required of board chairs of substantive council-controlled organisations and the role of the board chair and deputy chair

viii) the responsibility of the selection panel and the committee to assess the interests of candidates, and in making a recommendation where a potential conflict of interest has been identified ensuring that the conflicts of interest can be managed

ix) clarity that Auckland Council supports the payment by substantive council-controlled organisations of directors liability insurance and the indemnification of directors.

c) agree the substantive policy amendments as set out in attachment A and C, that cover:

i) Auckland Council’s policy on board diversity and inclusion

ii) a single selection panel for each substantive council-controlled organisation appointment process, with councillors drawn from an enduring pool of no less than four and no more than 10 members of the Governing Body

iii) that members of the enduring pool are appointed by the committee which holds the delegation at the beginning of the electoral term and that membership of the enduring pool may be amended from time to time by resolution of the committee.

d) agree that further clarity should be added to the policy about the eligibility and remuneration of elected members to the boards of smaller council organisations and that staff appointments are generally not recommended to these entities

e) delegate to the governance director and chair or deputy chair of the committee, the ability to make any further amendments to the policy agreed at its meeting

f) agree that in the event that the Local Government Act 2002 Amendment Bill (2) is passed, as currently drafted, amend section 8.7.1 of the policy to give effect to the new requirement to consider whether knowledge of Tikanga Māori may be of relevance to the governance of a council-controlled organisation.

Comments

5. At its 1 February 2017 meeting the Appointments and Performance Review Committee recommended to the Governing Body a program of work to improve the strategic alignment, accountability and responsiveness of CCOs. (Resolution number APP/2017/4)

6. The Governing Body at its 23 February 2017 meeting approved the recommended work program, which included a review of the policy and process for the appointment of board members to council organisations. (Resolution number GB/2017/17)

7. Auckland Council is required by section 57(1) of the Local Government Act 2002 (LGA) to have a policy that sets out an objective and transparent process for the:

· identification and consideration of the skills, knowledge and experience required of directors of a council organisation

· appointment of directors to a council organisation

· remuneration of directors of a council organisation.

8. The stated purpose of reviewing the policy and process for director appointments (CP2017/00880) was to identify opportunities for increasing the ability to align CCOs to the direction set by council and to ensure that council is attracting the best candidates to apply for board director positions. In addition, the review also assessed the policy:

· to identify opportunities to improve transparency and clarify accountability

· against good policy practice and similar policies for the appointment of board members to public sector entities

· against the process for appointment, to identify opportunities to:

o improve alignment between policy and practice

o enhance the efficiency of policy implementation.

9. A separate report on this agenda makes specific proposals on remuneration for substantive CCO directors. The policy sets out only high level overview for remuneration, allowing regular review through an agreed methodology.

Potential policy improvements

10. The review identified a number of potential improvements to the policy. On 8 June 2017 and 3 August 2017, at workshops of the Appointments and Performance Committee (which all members of the Governing Body were invited to attend) councillors were given an overview of findings of the review and the proposed substantive policy amendments. Feedback from these workshops has been taken into account in the recommendations set out in this report. The report sets out three areas of proposed policy amendments.

· Structural and editorial improvements: amendments which do not change the meaning of the policy but do improve the logic and flow of the policy, the readability of and consistency across the policy; which in turn results in enhanced transparency.

· Minor policy changes: proposed amendments and improvements which result in minor change to the policy. The report sets out the recommended policy amendment and the rationale for the recommended change. For the purpose of considering recommendations, the minor policy changes have grouped into two sets of recommendations.

Structural and editorial improvements

11. Table one shows a summary of the type of structural and editorial changes which have been made to the policy and the rationale for making these changes. These amendments do not result in any change to the meaning of the policy but do improve the logic and flow of the policy, the readability of and consistency across the policy; which in turn results in enhanced transparency.

12. Structural and editorial changes have been incorporated in the draft policy (Attachment A) but for ease of readability, are not highlighted.

13. The Local Government Act 2002 Amendment Bill (2) (the Bill), as currently drafted, will result in changes to the numbering of the clauses in the primary Act (the Local Government Act 2002) referenced in the policy. The dissolution of parliament, prior to the election, occurred on 22 August 2017 and the Bill had not yet been passed into law. On the passing of the Bill, Local Government Act 2002 references in the policy will be updated to reflect any changes to the numbering of clauses referenced in the policy.

Table one: Structural and editorial policy improvements

Structural and editorial improvements

Summary of rationale:

Structural, including:

· re-ordering policy content

· the addition of new headings.

To improve:

· logic and consistency across the four parts of the policy

· readability and flow

· transparency.

Editorial, including:

· re-drafting policy content in plain English and simplifying language

· removing duplicative policy content

· ensuring consistent terminology is used throughout the policy.

To improve:

· readability and flow

· consistency across the four parts of the policy

· transparency.

Proposed minor policy amendments and improvements

14. Table two below shows proposed minor policy amendments which are recommended for the policy, and a summary of the rationale for these. These amendments do not result in changes to the meaning or application of the policy and are shown in the draft policy (Attachment A) in green text.

15. Further detail on the proposed minor policy amendments is outlined in Attachment B.

Table two: Summary of proposed minor policy amendments

Proposed minor policy amendments:	Summary of rationale:
Amend the policy to: · include definitions of the terms: candidate, board member and committee · ensure the policy gives effect to the new requirement of section 60(3), as set out in the Bill, in the event that the Bill is passed · clarify the policy on remuneration of the board member nominated by New Zealand Transport Agency, in the body of the policy · outline the key reasons why Auckland Council appoints board members to council organisations.	To improve: · readability of the policy · consistency across the four parts of the policy · transparency and accountability.

Proposed minor policy amendments:

Summary of rationale:

Amend the policy to:

· include definitions of the terms: candidate, board member and committee

· ensure the policy gives effect to the new requirement of section 60(3), as set out in the Bill, in the event that the Bill is passed

· clarify the policy on remuneration of the board member nominated by New Zealand Transport Agency, in the body of the policy

· outline the key reasons why Auckland Council appoints board members to council organisations.

To improve:

· readability of the policy

· consistency across the four parts of the policy

· transparency and accountability.

16. Table three below shows proposed minor improvements which are recommended for the policy and a summary of the rationale for these. These improvements do not result in significant policy change and are shown in the draft policy (Attachment A) in blue text.

17. Further detail on the proposed policy improvements outlined in Attachment B.

Table three: Summary of proposed minor policy improvements

Proposed minor policy improvements:	Summary of rationale:
Clarify that: · when determining the skills, knowledge and experience required for a vacant substantive CCO board position, the current composition of the board and future skill requirements will be taken into consideration · to the extent possible, appointments made by Auckland Council to multiply owned CCOs should be made in a manner consistent with the objectives of this policy · persons disqualified from being a board member under section 151(2) of the Companies Act 1993 may not be appointed to substantive or non-substantive CCOs · the appointment of individual directors takes into account the balance of skills and experience on the whole of the board · board members of CCOs should undergo or have undergone formal governance training, or have the requisite governance experience · the additional competencies required of board chairs of substantive CCOs and the role of the board chair and deputy chair of substantive CCOs · multiple parties have a role in assessing the interests of candidates and the extent to which any potential conflicts of interest can be managed · Auckland Council supports the payment, by substantive CCO organisations, of directors’ liability insurance and the indemnification of directors · Auckland Council does not set the remuneration of the directors of non-substantive CCOs	To ensure council is able to attract the best candidates and to improve: · alignment between the policy and practice · clarity and consistency of practice · transparency and accountability · clarity of responsibilities · the ability to align CCOs to the direction set by council.

Proposed minor policy improvements:

Summary of rationale:

Clarify that:

· when determining the skills, knowledge and experience required for a vacant substantive CCO board position, the current composition of the board and future skill requirements will be taken into consideration

· to the extent possible, appointments made by Auckland Council to multiply owned CCOs should be made in a manner consistent with the objectives of this policy

· persons disqualified from being a board member under section 151(2) of the Companies Act 1993 may not be appointed to substantive or non-substantive CCOs

· the appointment of individual directors takes into account the balance of skills and experience on the whole of the board

· board members of CCOs should undergo or have undergone formal governance training, or have the requisite governance experience

· the additional competencies required of board chairs of substantive CCOs and the role of the board chair and deputy chair of substantive CCOs

· multiple parties have a role in assessing the interests of candidates and the extent to which any potential conflicts of interest can be managed

· Auckland Council supports the payment, by substantive CCO organisations, of directors’ liability insurance and the indemnification of directors

· Auckland Council does not set the remuneration of the directors of non-substantive CCOs

To ensure council is able to attract the best candidates and to improve:

· alignment between the policy and practice

· clarity and consistency of practice

· transparency and accountability

· clarity of responsibilities

· the ability to align CCOs to the direction set by council.

Proposed substantive policy improvements

18. Table four below shows a summary of the proposed substantive policy improvements which are recommended for the policy, and the rational for these. Policy options and an analysis of options are presented in Attachment C.

19. The recommended policy options have been incorporated into the draft policy (Attachment A) and are shown in red text.

Table four: Summary of proposed substantive policy changes

Proposed substantive policy improvements:

Summary of rationale:

· include objectives which set out what council is seeking to achieve when making board appointments

· clarify Auckland Councils’ policy on board diversity and inclusion

· that a single Selection Panel is responsible for short-listing and interviewing candidates and that councillors on the Selection Panel are drawn from an enduring pool

· clarify the role of the Selection Panel and adding a new policy setting on the role of the Chair of the Selection Panel

· clarify that when Auckland Council appoints board members to COs:

o elected members may be appointed as board members of council organisations

o staff of Auckland Council should not generally be appointed as board members of council organisations

· clarify that the remuneration of board members of COs is not set by Auckland Council and is at the discretion of that organisation, but where a council organisation offers remuneration to board members:

o Auckland Council would not expect remuneration to be paid to elected members

o staff members (where there is a requirement or compelling reason to appoint a staff member) would not be entitled to receive remuneration.

To ensure council is able to attract the best candidates and to:

· improve transparency and accountability

· clarify responsibilities

· enhance the efficiency of policy implementation.

Consideration

Local board views and implications

20. The views of local boards have not been sought in relation to the analysis in this report.

21. Local board members are currently appointed as board members to some smaller council organisations. This report recommends clarifying, that local board members may be appointed to such entities. This recommendation will not impact on local board members who have been appointed as board members of council organisations.

22. This report also recommends clarifying that local board members appointed as a board member of a smaller council organisation would not be expected to receive ordinary remuneration, should it be offered by the council organisation. If any local board members who have been appointed as a board member of a council organisation are currently receiving ordinary remuneration, this recommendation would have an impact on those board members.

Māori impact statement

23. The operation of CCOs has been noted by the previous Independent Māori Statutory Board as lacking transparency and not fully cognisant of the needs of Māori. Whilst the recommendations made in this report do not directly impact on the way in which CCOs operate, they do seek to improve:

· the ability to align CCOs to the direction set by council

· transparency and accountability of the appointment and remuneration of board members of council organisations.

Implementation

24. Where board appointment processes are already underway, it may not be practical to implement all policy changes during that appointment process. For example, nomination and interview panels may already have been selected and it may not be practical to move to using a single selection panel to short-list and interview candidates.

25. Policy changes will be applied to future appointment processes and where practical and appropriate, will be applied to appointment processes already underway.

Attachments

No.	Title	Page
a ⇩	Proposed Appointment and Remuneration fro Board Members of Council Organisations	23
b ⇩	Proposed minor policy changes	51
c ⇩	Proposed substantive policy changes	57

Signatories

Author	Rose Leonard - Executive Officer
Authoriser	Phil Wilson - Governance Director

Appointments and Performance Review Committee

25 September 2017

Substantive council-controlled organisations, board remuneration update review

File No.: CP2017/09920

Purpose

1. To make decisions regarding the remuneration for the directors of Auckland Council’s six substantive council-controlled organisations (CCOs).

Executive summary

2. Under council’s Board Appointment and Remuneration Policy, council reviews remuneration for substantive CCOs directors once every triennium following local body elections.

3. The last director remuneration increase of 1.5 per cent was approved by the CCO Strategy Review Committee (the committee) in 2012 and was applied to the base director fees for all substantive CCOs.

4. In 2011 MartinJenkins developed a methodology for assessing appropriate director remuneration. The methodology assesses each CCO on criteria including size and scale, complexity and scope of activities, accountability and skills required by board members.

5. The assessment methodology proposed that director remuneration be positioned in three distinct remuneration bands, with the remuneration of each band benchmarked against other relevant organisations and industry. The bands are as follows:

· Band One = $51,000 - $58,000 (Auckland Transport, Panuku, and Watercare)

· Band Two = $38,000 - $45,000 (ATEED and RFA)

· Band Three = $33,000 - $40,000 (ACIL).

6. Staff have reviewed the director remuneration against the methodology and advise the six CCOs are still appropriately positioned within each of the three remuneration bands.

7. The staff have used the 2017 Strategic Pay fee survey to analyse the annual market movement of directors and where relevant, benchmarks the council’s directors against appropriate or similar organisations and industry. The three-year rolling average change in median director fees between 2015 and 2017 was 2 per cent.

8. This report recommends that the remuneration for the directors of the council’s six substantive CCOs be increased, by 1.25 per cent commencing 1 November 2017.

Recommendation/s

That the Appointments and Performance Review Committee:

a) note that the six council-controlled organisations are still accurately positioned within the three remuneration bands.

b) approve an increase to base director fees for Auckland Council Investments Limited from $35,525 to $36,000 reflecting a 1.25 per cent adjustment for market movement.

c) approve an increase to base director fees for Auckland Tourism, Events and Economic Development Limited and Regional Facilities Auckland from $40,600 to $41,100 reflecting a 1.25 per cent adjustment for market movement.

d) approve an increase to base director fees for Panuku Development Auckland Limited, Watercare Services Limited and Auckland Transport from $53,300 to $54,000 reflecting a 1.25 per cent adjustment for market movement.

e) note the fees for council-controlled organisations chairs, deputy chairs and committee chairs will increase in accordance with new base fees multiplied by a factor of 2, 1.25, and 1.15 respectively, in accordance with the council’s Appointment and Remuneration Policy for board members.

Comments

Previous council reviews of director remuneration

9. Council’s Board Appointment and Remuneration Policy (the policy) requires the council to undertake a review of director remuneration once every triennium following council elections.

10. In 2011 council commissioned MartinJenkins to develop a methodology for assessing CCOs director remuneration.

11. The methodology established different fee bands based on industry benchmarks. Appropriate remuneration for each band was determined by benchmarking against other comparable entities and organisations.

12. The methodology then considered each council-controlled organisation against 10 criteria, which includes size and scale of the organisation, complexity and scope of the organisations activities, accountability and skills required by the directors.

13. The CCOs are allocated a numerical score for each of the quantitative and qualitative factors identified, and the total scores (out of a maximum possible 66 points) are grouped into bands for entities of similar size and scale of operations. The remuneration bands are:

· Band One = $51,000 - $58,000 (cumulative score of 46+ out of 66)

· Band Two = $38,000 - $45,000 (cumulative score of 37 – 45 out of 66)

· Band Three = $33,000 - $40,000 (cumulative score of 27 – 36 out of 66).

14. MartinJenkins noted that the initial positioning of the director remuneration was at the mid to high end of the public sector market, and was appropriate given the higher than normal workload on establishment, and the need to attract highly credible and experienced directors.

15. In 2011 MartinJenkins reviewed the director remuneration and assessed that the directors of Regional Facilities Auckland and Auckland Tourism, Events and Economic Development as having broadly equivalent dimensions as the Auckland Waterfront Development Agency. A recommendation to increase the base director fees of these two entities was approved by the CCO Strategy Review Committee to be phased across years 2011 and 2012. (Resolution number CCOS/2011/49)

16. In 2012 a 1.5 per cent market movement increase was approved by the committee to be applied to the base fees of all substantive CCOs. (Resolution number CCOS/2012/64).

17. In 2013, MartinJenkins undertook a further review, and council resolved that the methodology for setting director remuneration bands was still appropriate, and that each CCO was still accurately positioned within each of the bands. The CCO Governance and Monitoring Committee (the committee) also resolved to maintain the base fees of all substantive directors at the current level at that time, until the completion of the upcoming 2014-2015 CCO review. (Resolution number COU/2013/18)

18. In 2015, the governance committee has also approved the following (Resolution number COU/2015/61):

i) remuneration for Panuku Development Auckland directors to be increased in line with Auckland Transport and Watercare Services Limited

ii) annual remuneration reviews to be reduced to once every triennium and following local body elections.

19. As a consequence of these previous reviews, the remuneration for the CCOs directors have increased as shown in the following table:

Organisation	2010	2011	2012	2015	2017 current remuneration
Auckland Council Investments Limited (band three)	35,000	35,000	35,525		35,525
Auckland Tourism, Events and Economic Development (band two)	35,000	37,500	40,600		40,600
Regional Facilities Auckland (band two)	35,000	37,500	40,600		40,600
Watercare Services Limited (Band One)	52,500	52,500	53,300		53,300
Auckland Transport (band one)	52,500	52,500	53,300		53,300
Panuku Development Auckland (band one)				53,300	53,300

2017 review of changes in the size and scale, complexity, scope and accountabilities

20. Staff used the MartinJenkins methodology and 2017 Strategic Pay survey report when reviewing the director remuneration of the six substantive CCOs. Both documents are attached to assist the committee with its decisions.

21. Staff have reviewed the CCOs using the MartinJenkins methodology to assess if the scope of activities, responsibilities and accountabilities have changed since the 2013 review.

22. Despite some minor adjustments to the scores, largely due to changes to revenue and asset values, the scores do not cause any movement from one band to another and so will not impact on remuneration.

Benchmarking

23. The CCOs require a level of generic governance and leadership that is required on most other boards.

24. The MartinJenkins 2011 report identified a range of institutions that would likely be competing for the same pool of people in terms of their skill sets. These include:

· crown entities

· state owned enterprises

· local government organisations

· health sector organisations

· private sector organisations (construction / building /engineering / transport).

25. Director fees were generally highest in private sector listed organisations which reflects the ability of the sector to pay more, as well as the scale of these organisations and the responsibilities of the directors of these companies.

26. Director fees are lower in ‘not-for-profits’, education and local and central government organisations, which reflects the public sector nature of these roles, which are generally acknowledged to pay less than private sector corporate roles.

27. The Strategic Pay survey helps the council to benchmark against similar companies and organisations, and staff note that the benchmarking assessment revealed that the director remuneration is in keeping with the market and arguably still at the mid to higher end.

28. It is recommended that it is appropriate for director remuneration to remain at the mid to higher end of the public sector market given the size and scale of the CCOs. This is because of the scale of activities of Auckland’s CCOs is greater than other local government organisations in New Zealand.

Market movement

29. The Strategic Pay survey recommends using the three-year rolling average movement when applying market movements to set current director fees. The three-year rolling average change in median director fees for 2015 – 2017 is 2 per cent.

Current fees and recommended changes for 2017

30. Staff recommend an increase of 1.25 per cent to the base fees for all substantive CCOs directors from 1 November 2017. This is lower than the three-year rolling average in median fees of 2 percent but takes into account these are public sector entities, and directors acknowledge these roles pay less that private sector corporate roles.

31. Current remuneration rates for directors along with the proposed increase to base director fees and the total annual cost for each council-controlled organisation are shown in the table below.

CCO	2017 current remuneration	2017 Proposed increase (1.25 per cent)	$ (increase to base-director fees)	$ 2016 (approximate total annual fees for CCOs)	$ 2017 (approximate total annual fees for CCOs)
Auckland Council Investments Limited (Band Three)	35,525	36,000 (35,969)	475	142,100	144,000
Auckland Tourism, Events and Economic Development (Band Two)	40,600	41,100 (41,107.50)	500	347,130	351,045
Regional Facilities Auckland* (Band Two)	40,600	41,100 (41,107.50)	500	446,600	404,835
Watercare Services Limited* (Band One)	53,300	54,000 (53,966.25)	700	509,015	453,500
Auckland Transport (Band One)	53,300	54,000 (53,966.25)	700	509,015	515,700
Panuku Development Auckland* (Band One)	53,300	54,000 (53,966.25)	700	533,000	477,900
*Regional Facilities Auckland, Watercare Services Limited and Panuku Development Auckland will reduce their boards by one member from 1 November 2017			TOTAL	$2,486,860	$2,346,980

32. If the recommendation for a 1.25 per cent increase is agreed the chairs, deputy chairs and committee chairs will increase in accordance with the new base fees multiplied by a factor of 2, 1.25, and 1.15 respectively, in accordance with the council’s Appointment and Remuneration Policy for board members. These are incorporated into the approximate total annual figures listed in the table above.

33. A larger increase is not recommended, because there is no evidence that council’s remuneration rates need to be substantially raised to enhance the ability to attract a greater pool of candidates, or higher quality candidates.

34. Staff also make this recommendation because there has not been an increase since 2012. Keeping some relativity to the market is consistent with both council’s methodology for fee setting, and also to reflect good faith with directors who are contributing to these important public entities.

35. The reasons for increasing the director fees are:

· remuneration reviews are only undertaken once every triennium, with the next review planned for 2020, and the last increase to director remuneration (1.5 per cent market movement) was applied in 2012

· a nominal increase is recommended as an act of good faith to recognise the important contribution made by the governors of Auckland’s CCOs

· a nominal increase will maintain the director remuneration within the mid to high level market and continue to attract high calibre candidates into council directorships, though staff note that the current fees do not appear to be a barrier to attracting high calibre candidates.

Consideration

Local board views and implications

36. Director remuneration is a matter for the council’s Governing Body.

Māori impact statement

37. Director remuneration has no specific implications for Māori wellbeing, capacity or engagement.

Implementation

38. Director remuneration is funded from CCOs overall budgets. Any increase in director remuneration would need to be funded from within the CCOs existing budgets.

39. Staff will advise the CCOs of the committee’s resolutions.

Attachments

No.	Title	Page
a ⇩	Auckland Council Directors Remuneration Methodology (Executive Summary)	71
b ⇩	New Zealand Directors' Fees Report 2017 (Executive Summary) - Confidential

Signatories

Author

Josie Meuli - Senior Advisor

Authorisers

Alastair Cameron - Manager - CCO Governance & External Partnerships

Phil Wilson - Governance Director

Appointments and Performance Review Committee

25 September 2017

Process for undertaking the chief executive's performance review

File No.: CP2017/19610

Purpose

1. To note the process for conducting the chief executive’s performance review. The performance review will be undertaken in the confidential agenda.

Executive summary

2. The Appointments and Performance Review Committee is responsible for reviewing the chief executive’s performance and for recommending to the Governing Body the terms and conditions of the chief executive’s employment including any performance agreement measures and annual remuneration.

3. The chief executive’s current performance objectives were set by the Governing Body on 17 December 2015 to cover the 2016 and 2017 calendar years (Resolution number GB/2015/135). The objectives were set for a 24 month period to enable the council to progress longer term changes, and for these to be reflected in the chief executive’s performance review.

4. The mayor has requested that the committee review the chief executive’s performance against the current objectives at this committee meeting. This will enable the Governing Body to approve a new set of chief executive performance objectives later this year to reflect the new priorities of the Governing Body.

5. To assist the committee and the chief executive in their dialogue on employment matters, staff have provided advice on:

· the legal and statutory responsibility of the Governing Body in setting and reviewing the chief executive’s performance objectives

· the Appointments and Performance Review Committee’s responsibilities in relation to conducting a review of the chief executive’s performance

· the context of the current performance objectives.

6. This report contains a copy of the performance objectives set by the Governing Body (Attachment A).

7. The confidential agenda includes other information to assist the committee in its discussion with the chief executive. The confidential agenda includes:

· a scorecard of progress against the objectives

· additional information on achievements that are not fully captured in the scorecard

· a summary of feedback from external stakeholders

· information relating to the chief executive’s employment terms and conditions

· the decisions that will be required of the committee and the Governing Body over the next 16 months.

8. Staff are preparing advice on new performance objectives for the committee’s consideration and these will be presented to the committee for discussion at its meeting on 27 October 2017.

Recommendations

That the Appointments and Performance Review Committee:

a) note the process for undertaking the chief executive’s performance review that will be undertaken in the confidential agenda.

Comments

Legal framework

9. There are three aspects to the legal framework governing a local authority’s employment relationship with the chief executive.

10. First, every employment relationship is:

· underpinned by an employment agreement; and

· subject to the Employment Relations Act 2000.

11. Secondly, the powers of a local authority to employ staff (including its chief executive) are contained in, and governed by, the Local Government Act 2002 (LGA 2002).

12. Thirdly, other generic legislation (for example, the Privacy Act 1993) can also affect an employment relationship.

Local Government Act 2002

13. Under the LGA 2002, the council is responsible for appointing a chief executive and for setting performance expectations. Under clause 34(2) of Schedule 7, the local authority and the chief executive must enter into a performance agreement. The chief executive is responsible to the council for meeting his or her statutory obligations under section 42(2), and his or her performance expectations under the performance agreement.

Appointments and Performance Review Committee responsibilities

14. The Governing Body has delegated to the Appointments and Performance Review Committee responsibility to “review the chief executive’s performance and to recommend to the Governing Body the terms and conditions of the chief executive’s employment including any performance objectives and annual remuneration”.

Previous performance objectives and reviews

15. Chief Executive Stephen Town’s contract commenced in January 2014. The former Governing Body confirmed a set of performance objectives in late 2013 for the incoming chief executive. The chief executive’s performance was reviewed by the CEO Review Committee in May 2014 and December 2015, and performance was discussed by the committee on a bi-monthly basis in the intervening periods.

16. The chief executive’s current performance objectives were approved by the Governing Body on 17 December 2015 to cover the 2016 and 2017 calendar years (Resolution number GB/2015/135). The CEO Review Committee last reviewed the chief executive’s performance against the current objectives in September 2016.

The context of the current performance objectives

17. The current objectives cover three non-financial performance measures and one financial measure:

· Sound financial stewardship - achieving targets associated with lower costs, increased revenue, and prudent financial management.

· Customer, citizen and community satisfaction – serving council’s diverse range of customers.

· Efficient and effective council – organisational internal processes.

· Developing a vibrant organisation prepared for growth - organisational capacity.

18. The performance objectives are intended to focus performance on the critical aspects that are important to council. They do not describe every aspect of the chief executive’s job description and do not include expected behaviours or personal development objectives.

Decisions required of the committee and the Governing Body

Informing councillors of the outcome of this performance review

19. The committee is not required to report back to the Governing Body on the outcome of this performance review. However, it is good practice to inform councillors of the outcome of the review and any important observations or discussions. Committee members should decide if this is required, and if so, the best way to update councillors.

New performance objectives

20. The current performance objectives expire in December 2017. To ensure new performance objectives are in place, this committee will need to recommend new objectives to the Governing Body between November and December 2017.

21. The mayor and staff will report back to this committee next month on a proposed set of new objectives for the committee’s consideration.

Consideration

Local board views and implications

22. Local board chairs were consulted in the development of the chief executive’s performance objectives. Local board chair views have not been sought for this report.

Māori impact statement

23. Māori outcomes are influenced through the delivery of council outputs and the effectiveness of council’s operational capability and capacity.

Attachments

No.	Title	Page
a ⇩	Chief Executive's Performance Objectives 2016 to 2017	77

Signatories

Author

Michael Quinn - Executive Officer

Authorisers

Phil Wilson - Governance Director

Patricia Reade - Transformation Director

Appointments and Performance Review Committee

25 September 2017

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

That the Appointments and Performance Review Committee:

a) exclude the public from the following part(s) of the proceedings of this meeting.

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution follows.

This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:

11 Substantive council-controlled organisations, board remuneration update review - Attachment b - New Zealand Directors' Fees Report 2017 (Executive Summary)

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution