Part 3: Variations between Crown entities

14 As acknowledged above, and as specifically provided for in the amended State Sector Act 1988, there may be legitimate reasons for varying the application of particular standards of integrity and conduct. For example:

• Crown entities are legally separate from the Crown (therefore, not all the conventions and standards that apply in the Public Service would apply automatically or uniformly to Crown entities)
• there is great diversity in terms of the relationship between Crown entities and the government of the day e.g.:
  
  • the responsible Minister may direct a Crown agent to give effect to a government policy; the board members may be removed by the responsible Minister entirely at his or her discretion
  • the responsible Minister may direct an autonomous Crown entity to have regard to a government policy; the board members may be removed by the responsible Minister for any reason that in the Minister's opinion justifies the removal
  • the responsible Minister of an independent Crown entity may not direct the entity to give effect or have regard to a government policy unless specifically provided in a different statute to the Crown Entities Act; the board members may be removed by the Governor-General for just cause, on the advice of the responsible Minister after consultation with the Attorney-General
• there is a need to acknowledge the special nature of some entities (e.g. corporations sole)
• the directors of Crown entity companies have duties under the Companies Act 1993 that are separate from, and in addition to, their duties under the Crown Entities Act 2004. The duty to act in what the director believes to be the best interests of the company is pertinent
• standards are to apply to board members and employees but their roles, responsibilities and relationship with the responsible Minister differ significantly
• some board members of statutory entities are elected rather than appointed (which creates an accountability to parties other than the responsible Minister), and
• there is also a need to acknowledge the special status of those Crown entity employees who are appointed to statutory officer positions and, as a result, are required to act independently (usually of both the Minister and the board).

15 The distinction between Crown entity board members and employees merits particular comment. Many parties can have a legitimate interest in the conduct of Crown entity board members (e.g. the chairperson, other members on the board, a select committee undertaking a review, the Minister of Finance, the Auditor-General, the Ombudsmen, the State Services Commissioner, the public). However, the board's most important relationship in terms of accountability is with the responsible Minister. What constitutes appropriate conduct in certain cases for board members (particularly in relation to political participation) may come down to:

• the fundamental requirement (expressed in the Crown Entities Act 2004 as an individual duty of members of statutory Crown entities) that a member must, when acting as a member, act in good faith and not pursue his or her own interests at the expense of the entity's interests
• the nature of the Minister-board relationship in terms of Ministerial powers to direct and dismiss, as summarized in the preceding paragraph in respect of the three types of statutory Crown entities.

16 Accordingly, the boundary on acceptable conduct for a Crown entity board member could be relatively broad or flexible in cases where the Minister has broad discretion to remove the member. A board member of a Crown agent entity, for example, could have political affiliations and carry out a certain level of personal political activity as long as it:

• does not amount to acting as a member and pursuing his or her own interests at the expense of the entity's interests. The entity's ability to maintain the confidence of the government of the day as well as any future government is central to the entity's interests
• does not exceed what the Minister considers appropriate for a Crown agent board member. If that were to happen, the Minister has broad discretion to remove the member. It would be prudent for a board member who wishes, for example, to carry out a certain level of personal political activity, to bear in mind that one Minister's view may differ from the next Minister's view on what constitutes pursuing the member's own interests at the expense of the entity's interests. Ultimately, the Minister will decide what is acceptable.

17 Conversely, there could be stricter boundaries on acceptable conduct in cases where the legislation gives a high degree of protection to members in terms of being removed by the Minister. Stricter rules about political affiliation and participation are likely to apply to board members of independent Crown entities, because it is more difficult to remove them if they exceed what is appropriate for members who must be, and must be seen to carry out their role, free from political or Ministerial influence.

18 As a result of the considerations in the preceding paragraphs, it is much more complex to set minimum standards of integrity and conduct for Crown entities than for the Public Service. It is not possible for the SSC alone to anticipate all the special circumstances that might arise across the Crown entity sector: the discussions with entities will be critical.