IoD still concerned about law changes

IoD still concerned law changes will undermine governance in Crown entities

The Institute of Directors (IoD) is concerned planned changes to state sector legislation will undermine the role of Crown entity boards and deter directors from serving on them.

Parliament’s governance and administration select committee has reported to Parliament this week on the State Sector and Crown Entities Reform Bill which will amend existing state sector legislation.

The Bill requires Crown entity boards to gain written consent from the State Services Commissioner on employment terms and conditions for Crown entity chief executives. This is a shift from the current situation where boards are required to consult the Commissioner.

General Manager of the IoD’s Governance Leadership Centre Felicity Caird says it is disappointing the proposed changes are going ahead.

“The current requirements are generally working well and this is a disproportionate response that may have unintended outcomes”

“Appointing and managing the CEO is one of the most important functions of a board. The proposed change risks undermining the role of the board and its relationship with the responsible Minister,” Felicity Caird says.

“It’s likely to deter experienced directors from putting themselves forward to serve on state sector boards.”

The parliamentary select committee has made further changes to the Bill, requiring the State Services Commissioner to consider information provided by the board about the terms and conditions of a chief executive’s employment. This includes relevant market information and information about the CEO’s knowledge, skills, experience, and performance.

Felicity Caird says: “This is a positive change but for it to have real meaning, boards need to be truly heard and the Commissioner will need to give sufficient weight to their advice.”

“This is supported by another change in the Bill requiring the Commissioner to provide reasons for refusing consent to any proposed terms and conditions.

“The reasons would need to be substantive given the board’s critical role in appointing and managing the CEO, ” Felicity Caird says.

Click here to read the IoD’s Submission on the State Sector and Crown Entities Reform Bill.

Click here to read IoD’s previous statement about proposed changes the State Sector and Crown Entities Reform Bill.

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