Auckland Council reviews business boards
The Auckland super-city is flexing its commercial muscles and making the businesses it owns more accountable to the council for their performance.
The council is embarking on a review of the performance of the directors of its Council Controlled Organisations (CCOs), which include Auckland Council Investments (the company that holds the council's shares in Ports of Auckland and Auckland International Airport), Watercare Services (the region's water company), Auckland Council Property (which manages about $900 million worth of council-owned properties) and Auckland Transport.
As well as reviewing the performance of these organisations' boards, the council is also reviewing their governance and relationship with the council and looking to clarify their roles and responsibilities.
The boards and chairmen were initially appointed by central government and confirmed by Cabinet during the formation of the super-city, a reform led by then Act MP and minister for local government Rodney Hide.
Consultants are being appointed to conduct an assessment of each CCO's board "with a particular focus on board effectiveness in decision-making, and responsiveness to shareholder expectations", according to council documents.
In each case, the shareholder involved is Auckland Council itself.
The consultants will be required to assess the performance of each organisation's chairman and the skills of their boards and whether there are any gaps in the skills the directors bring to the table, and assess each organisation's improvement plans and the performance of any director whose term is due to expire (and who may be eligible for reappointment) before a scheduled 2013 board performance review.
Particular areas to be covered in the report will be how well each organisation's strategic plan and objectives sit with the council's long-term plan and the input each organisation's board provides to the council's strategic planning processes.
In evaluating the performance of the boards, the consultants will consider the quality of board discussions and debates, whether directors challenge each other's views, and how well they keep each other informed of relevant matters.
Before awarding the contract for the review, the council wants each consultant to provide details on how they would deal with resistance by CCOs to the review process.
Council documents state that such resistance could take several forms, including boards or individual directors being reluctant to share performance information with the council; boards using the review as an opportunity to complain about the council, and; chairmen putting pressure on the consultants to review their findings.
The move for an external assessment follows a council committee's review of its governance relationship with the CCOs, undertaken nine months after the new amalgamated super city was formed.
This paid particular attention to a report which was highly critical of the Dunedin City Council's governance of Dunedin City Holdings.
"[Auckland Council] officers note a recently released report on Dunedin City Council and its governance of Dunedin City Holdings Ltd [DCHL] and its subsidiaries, which illustrates the consequences of poor governance and a lack of clarity about roles," the committee's report said.
"The report reveals a dysfunctional situation, which has allowed DCHL to meet council's increased demands for dividends from borrowing rather than profits. While none of the major issues identified in the report, such as poor recruitment policies and ambiguous statement of intent goals, are applicable to the Auckland Council and its CCOs, the report highlights the importance of sound governance and practice."
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