- Title page
- Purpose of this guidance
- Who is this guidance for
- How to use this guidance
- Chapter 1: Relevant legislation
- Chapter 2: Functions and powers of the entity
- Chapter 3: Key relationships
- Chapter 4: Collective duties of the board and individual duties of board members
- Chapter 5: Role of the board chair
- Chapter 6: General responsibilities of members
- Chapter 7: Members' interests and conflicts: identification, disclosure and management
- Chapter 8: Disclosure of information
- Chapter 9: Gifts and hospitality
- Chapter 10: Board meeting procedures
- Chapter 11: Board committees
- Chapter 12: Delegations
- Chapter 13: Crown entities as employers
- Chapter 14: Subsidiaries
- Chapter 15: Planning and reporting
- Chapter 16: Board and member performance evaluation
- Chapter 17: Board appointments and reappointment
- Chapter 18: Remuneration and expenses for board members
- Chapter 19: Liability and protection from legal claims or proceedings
- Summary of minimum content for a governance manual by chapter
Chapter 7: Members' interests and conflicts: identification, disclosure and management
Interests, if not disclosed, registered and managed properly, have the potential to lead to conflicts that could undermine decisions taken by a board and the confidence held by stakeholders and the public in the actions of the entity. Good governance requires that boards have robust arrangements in place to address perceived as well as actual conflicts.
In the public sector, there will be a conflict of interest where a "member's...duties or responsibilities to a public entity could be affected by some other interest or duty that the member may have". 2
These "other" interests can take various forms. They may be financial or non-financial. They may relate to a member's close family or friends, or to something the member has said or done.
The existence of the interest is not, in itself, what causes the conflict. The key is to identify any overlap between the interests. Also, appearances in this area can be equally as important as reality. It is often this risk of negative public perception that requires management.
The test of whether a disclosed interest amounts to a conflict is whether the other interest creates an incentive to the person to act in a way that may not be in the best interests of the organisation.
Several factors are relevant when assessing the seriousness of a conflict of interest, including:
- the type or size of the member's other interest and the extent to which it could specifically affect, or be affected by, the entity's decision or activity;
- the nature or significance of the decision or activity being carried out by the entity; and
- the nature or extent of the member's current or intended involvement in the entity's decision or activity.
Seriousness is a question of degree. Directness or remoteness are about how closely or specifically two interests concern each other. Significance is about the magnitude of the potential effect of one interest on the other.
Section 55 of the Crown Entities Act (CE Act) places a duty on board members not to pursue their own interests at the expense of the interests of the entity. This means that members must perform all aspects of their work for the entity impartially, by:
- avoiding any situation where actions they take in an official capacity could be seen to influence or be influenced by a private interest that they, family members or close friends may hold;
- avoiding situations that could impair their objectivity or create personal bias that would, or could reasonably be seen to influence their judgements; and
- ensuring they are free from any obligation to another party.
The Auditor-General has issued guidance on managing conflicts of interest in public entities: www.oag.govt.nz/2007/conflicts-public-entities. This states that public entities, when making decisions on conflicts, ought to be guided by the concepts of integrity, honesty, transparency, openness, independence, good faith, and service to the public. The Auditor-General's guidance states that "many situations are not clear-cut. If a member is uncertain about whether something constitutes a conflict of interest, it is safer and more transparent to disclose the interest anyway. The matter is then out in the open, and the expertise of others can be used to judge whether the situation constitutes a conflict of interest, and whether the situation is serious enough to warrant any further action. Disclosure promotes transparency, and is always better than the member silently trying to manage the situation by themselves."
2 Managing Conflicts of Interests: Guidance for Public Entities, Office of the Controller and Auditor-General, p.5.