Corporate Governance Local Body Governance – How does it rate?

Local government is huge player n the local economy. It chomps through $3 billion worth of spending money every year and contributes 3.5 percent of the country’s gross domestic product.

The Economist, that most respected of international politico/economic magazines, recently suggested local governments were far more influential than national ones. If so, the enormity of the role of our local authorities makes the quality of its governance practices fairly important – and the responsibility for ensuring that it is indeed so is pretty much yours and mine. We, the ratepayers, choose them.

New Zealand’s 12 regional councils, 15 city councils and 59 district councils have collective term assets of $32.5 billion and employ some 40,000 people.

The governing body consists of the 1152 plumbers, lawyers, teachers, funeral directors or (pick your occupation) that we elect as our community representatives.

What they know about governance may fail to evict many angels from the head of pin – or it may fill sizeable tomes. It depends on their experience or enthusiasm.

Their level of individual competence is not always question the 52 percent or so of us who appoint them, often, or even ever, ask. But, at time when the quality of corporate governance is squarely under the spotlight, and new legislation has shifted the emphasis on local body governance quite clearly our way – it could be worth posing the question more frequently. There’s not only lot of money and great many jobs at stake here but the well-being of the communities in which we all work and live.

So, just how good is the current level of local body governance?

The general consensus is that it’s all rather more hit and miss than it should be.

With 10 years’ experience in the sector under his chain of office, Waitakere Mayor Bob Harvey wants some improvement. In his opinion, councils often make “unnecessary blunders” because members either don’t have good grasp of governance principles or simply aren’t interested. “There’s lot of arrogance and ignorance in some local councils – they can sometimes be quite dysfunctional,” he says ruefully.

Discerning votes
Voters, he says, are becoming more discerning about their choice of representatives, but because the democratic process is low personal priority it delivers mix of good and bad. His answer: more training for the eventually elected.

“Waitakere [City Council] had four [governance] sessions in its first two months. We put an enormous amount of emphasis on it and it’s really paid off. So I urge councils to seriously up-skill council and community board members in governance issues and legal and pecuniary interest areas,” he adds.

Auckland Regional Council CEO Jo Brosnahan acknowledges the “element of luck” in elections that throws up the makings of governance body capable of delivering good direction to what are often large, complex organisations.

“These [local authorities] are hard organisations to run,” says Brosnahan. “There is wide range of stakeholders to whom they are accountable, and the political context that surrounds them makes the task that much harder than in the private sector environment.”

And there is never enough training given to help iron out the inevitable variability in competence levels.

New Zealand trails the field bit on that count, adds Michael Reid, manager governance for Local Government New Zealand. “We’ve not been as active as some countries in terms of providing training for elected members.”

LGNZ runs courses for newly elected representatives and mayors; councils run their own induction sessions; and there are various one-off courses run through universities or private organisations. But, says Reid, there’s no ongoing education.

The issue is, however, now being addressed through joint initiative from LGNZ, the Department of Internal Affairs and the Society of Local Government Managers (SOLGM).

The group has put together bundle of information, guidelines and training material in programme entitled Local Government “Knowhow”. It is being rolled out across the country via series of seminars that kicked off last month. Programme content includes defining what is “governance” and representatives’ roles and responsibilities in light of the new Local Government Act 2002 (passed in last year’s closing session of Parliament).

The Act represents the first major legislative change to local government since the reforms of the late 1980s. These introduced annual plans, put more emphasis on community consultation and created clear policy/service provider split.

Focussing on the strategic
That separation of governance (policy making, strategic overview, financial goal setting etc) from day-to-day administration (staff management, work contracts, operational spending and the like) is an area of management where New Zealand is running ahead of many overseas local bodies, according to Reid.

Elected councillors in Australia, for instance, still take hands-on approach to their council’s daily operational activity. Elected representatives think more strategically here, particularly in the bigger councils where there is more distance from the day-to-day decision making. “A culture of big picture thinking is coming through,” says Reid.

Recent legislative changes encourage this strategic approach and place greater emphasis on community consultation.

The new Act is having two key effects, according to Reid. It is pushing councils further into thinking about long-term community outcomes and what must be done to achieve these. The second impact involves the need to work more closely and collaboratively on these agreed outcomes with other community agencies and sectors.

Many provisions in the legislation are designed to make council operations more transparent, and include codes of conduct and governance statements.

The Knowhow programmes focus strongly on governance and decision making and show councils how to put codes of conduct and governance statements together.

Topics also include relations both with their chief executive and the various council-controlled organisations, performance monitoring, financial management requirements, community engagement (including relations with other stakeholder sectors such as business or Maori), and community outcomes.

Programmes and guidelines covering other aspects of local government direction will be progressively rolled out through to June this year.

The education initiative is directed toward both management and elected representatives and draws clear lines between their respective responsibilities, says SOLGM executive director David Smith. “Politicians being politicians think they can come in and change the world and find themselves in system that isn’t quite like that. It is matter of explaining what are the governance responsibilities, what sort of behaviours are expected and how to retain good relations (both with council management and other organisations).”

Bob Harvey is an “unashamed fan” of the new legislation. It reflects the Waitakere experience and approach. “Involving the community in council decision making is the only way to go – even if it can be painful and at times more expensive, you get better long-term outcome.”

The Act is “triumph of common sense” that brings opportunities for improved governance training, says Harvey but he still despairs that local government is “too old, too male and too white”.

LGNZ’s Reid thinks the Act is creating better work context for members in terms of rules and framework. He wants to make New Zealanders realise how important council representation is. He hopes that over time “more people want to do it and that competition will help raise the skill level of those who stand. Having people in those positions able to provide good leadership is critical.”

Brosnahan believes good governance in the public sector is even more important than it is in the private

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