State Sector Governance under the spotlight

Sam Sachdeva
Wellington, December 18, 2018

Potential governance gaps in the State Sector are being put under the microscope, following a Newsroom investigation which revealed mismanagement concerns at a Crown entity.

The State Services Commission is also investigating the monitoring work done by some government agencies after a run of high-profile problems.
A Newsroom investigation into bullying allegations against Retirement Commissioner Diane Maxwell raised some concerns about the structure of her Commission for Financial Capability (CFFC) and whether it had allowed the alleged mistreatment to go undetected.
Corporation Sole
The CFFC is one of four entities in the wider State Sector that runs as a “Corporation Sole” – a legal construct meaning that the Commissioner is themselves the corporation, functioning as their own Board.
Several former employees told Newsroom that the structure put nearly all the power in Maxwell’s hands, with one saying: “It goes everyone, then Diane, then the Government.”
State Services Commissioner Peter Hughes initially suggested that the governance issues
would feature in the terms of reference for the SSC’s inquiry into the bullying allegations.
Independent Review
While the issue was absent when the inquiry’s terms were announced, Mr Hughes confirmed to Newsroom that the SSC would carry out a separate review of “structural issues relating to how some Crown entities are governed and managed, as well as the role and function of monitoring agencies”.
“The arrangements we have at the moment have been in place a long time and may no longer be fit for purpose,” Mr Hughes said.
State Services Minister Chris Hipkins said that the Government would await the results of the SSC’s work, but suggested the scale of any issues was unlikely to be significant.
“There are only four of them, so, it is important that we do not overstate the problem, but I think it is worth us having a good look at it and just making sure that we have got things right, and if there are some refinements needed there then we can look at that.”
Advocacy Role
Mr Hipkins said that the Corporation Sole construct was valuable in lending greater independence to officeholders in a policy or advocacy role, while he did not want to “overcomplicate” the structure of smaller organisations by requiring them to have Boards.
However, he said it was important to have safeguards in place to ensure employees at the Corporation Soles knew where to go if they had a problem.
“It may be that points of escalation need to be more clearly articulated, so if you do have an issue, if you’re an employee of an organisation like that, where do you go if you’ve got a problem?”

Privacy Commissioner John Edwards, whose office functions as a Corporation Sole, said that the structure gave him added independence in what was a ‘quasi-judicial’ role.
“For me, it is just like running my own company in a sense – I am responsible for everything, I take the blame for everything, my staff get the credit for everything.”
Board, no value
Mr Edwards did not believe that a Board would add much value to his office’s work, while he was also unconvinced that an extra layer of governance at Corporation Sole would help to stop bullying going undetected.
“What if the Board’s useless, or if the Board’s the bullies? You get chairs of Boards reaching through that independence layer and interfering with staff, and you see that in local government, so I’m not sure that the governance arrangements are determining factors here.”
The SSC’s work will stretch beyond Corporation Sole, looking more widely at both Crown entities and monitoring agencies.

Agencies Structure
Some concerns have been raised recently about the structure and role of some monitoring agencies: most recently, the Ministry of Transport has been tasked with carrying out a review into failings with the NZTA’s monitoring work, despite the ministry’s own responsibility to monitor the transport agency’s performance.
Hipkins said the main question appeared to be whether monitoring agencies were “using the levers that are available to them” to get the information they needed, pointing to an agency in his own education portfolio as an example.
“The Tertiary Education Commission (TEC) now are being much more proactive in getting information out of polytechnics and universities so they can do their monitoring role more effectively, and I think that’s absolutely legitimate.
“One of the questions that I think the Commissioner will be looking at is, are the monitoring agencies leaning into that role as much as we expect them to be, because they certainly should be identifying these issues well before they become problems.”
Unclear timeline
The timeline for the SSC’s work is still unclear: Hughes said he was still finalising its scope, while Mr Hipkins said it would “take as long as it takes.”
“I don’t want them to drag their heels on it, but I don’t want it to be an expedited process either.”
Sam Sachdeva is Political Editor of Newsroom covering Foreign Affairs, Trade, Defence and Security Issues based in Wellington. The above article and picture which appeared in the Web Edition of Newsroom on December 18, 2018, have been reproduced here under a Special Arrangement.