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Crown Entity Governance & The Lotteries Commission

State Services Minister Simon Upton moved today to put the recent events at the Lotteries Commission into the wider context of an ever more transparent and accountable public sector.

"Most of the recent attention given to executive payments in public organisations has arisen from the Government requiring full disclosure of those payments.

Full disclosure of payments to Chief Executives and senior managers has been in place for some time now for State Owned Enterprises and for Government Departments. Only since March 1998 have similar reporting requirements been extended to the third major category, Crown entities.

"The Government had been dis-satisfied with the rather messy regime covering Crown entities. Since the State Sector reforms of the late 1980s, it has been explicitly a matter for boards to decide on Chief Executive remuneration in SOEs and Crown entities. The roles of Ministers and the State Services Commission for the Crown entities group, meanwhile, remained unclear. The grounds for dismissing boards of Crown entities when things went wrong were very narrow in many cases.

"These concerns led directly to the Crown entities package of 15 July. For the future, the rules are very clear. Any proposed payments outside the guidelines will be brought to the attention of Ministers. Any new appointments to boards (aside from quasi-judicial entities) will sit under the full knowledge that they remain at the pleasure of the Crown.

"Last week, following the disclosure of another unsatisfactory example from the old regime, the Prime Minister asked me to pull together all the information available to us on Crown entities and state agencies. The object was to see if there were any other employment packages that were widely out of line.

"I am concerned, but not surprised that as the management arrangements for this large and varied group of organisations have been brought out into the open, out-liers have emerged", Mr Upton said. "The ad hoc arrangements that governed them for over a decade made this almost inevitable. The July guidelines guaranteed they would see the light of day."

In the case of the Lotteries Commission, the remuneration package to the Chief Executive was inconsistent with SSC guidelines. The Lotteries Commission complied with the obligation to consult but, under the rules of the day, it was under no obligation to accept the SSC's advice.

"The Government will not be seeking to dismiss board Chair, Mr Geoffrey Thompson. While the Government may disagree with the decisions the Lotteries Commission made, it was entitled under the old regime to exercise its judgement.

"If the same situation were to arise today under the new regime, the outcome would be very different. The Lotteries Commission will not have the same freedom in respect of Mr Bale's replacement," Mr Upton said.

"Another oversight that my investigation has uncovered relates to the ACC. The ACC board failed to consult over the terms and conditions for its Chief Executive as it was required to do. The Chief Executive's overall salary package was also at the extreme upper end of the guidelines.

"The SSC is not aware of any other remuneration packages which are significantly outside the guidelines, for those Crown entities which are required to consult with it.

"The SSC is aware of instances where consultation has been less than adequate.

"Lapses in process are of considerable concern to the Government. But they must been seen as the tail end of an old regime that related to Crown entities. I am confident that the new Crown entities framework will ensure that, into the future, any proposed departures from Government guidelines will be identified and reported to Ministers well before they become a problem," said Mr Upton.

The highest rates of payment in the State Sector are for the most senior management in SOEs - TVNZ, the former ECNZ, NZ Post, and others. Most of these have already been publicised. The Minister for State Owned Enterprises is making a separate statement on SOE sector salaries.


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