Conflicts of Interest are an important issue for any board as the Board is seen as setting the tone for an organisation.
For Crown-connected boards, ensuring that a Conflict of Interest is properly identified and managed is essential as the public regards Crown boards as acting in the public interest and are very critical of any perceived breach, regardless of whether the breach is real.
Formal Crown entities are now subject to a prescribed Conflicts of Interest regime under the Crown Entities Act 2004. Those Crown-connected organisations that are not covered by the Crown Entities Act still have onerous responsibilities under both common law and their entity’s enabling documents (Deeds of Trust, other Acts of Parliament, etc).
For all Crown boards - What is a Conflict of Interest?
The Office of the Auditor General in 2006 stated the following: "A conflict of interest arises where two different interests intersect.” In the public sector, a conflict of interest exists where a person’s duties or responsibilities to a public entity could be affected by some other separate (and usually private) interest or duty that they may have. Conflicts of interest can have both legal and ethical dimensions.
One way of considering whether a conflict of interest may exist is to ask: “Does the issue create an incentive for the person to act in a way that may not be in the best interests of the public entity?’’ If the answer is in the affirmative a conflict is possible”.
For Crown entities – the definition of ‘interested’
Board members of Crown Entities should be aware of the very wide scope of what ‘interested’ means under the Act. A person is interested in a matter if he or she:
- May derive a financial benefit from the matter;
- Is the spouse, defacto partner (whether of the same or different sex), child or parent of a person who may derive a financial benefit from the matter;
- May have a financial interest in a person to whom the matter relates;
- Is a partner, director, officer, board member, or trustee of a person who may have a financial interest in a person to whom the matter relates;
- May be interested in the matter because the entity’s Act so provides; or
- Is otherwise directly or indirectly interested in the matter.
Some Best Practice procedures
- A register of interests, regularly updated
- Identification (often by Management) and noting of interests in preparing agenda
- Interest disclosure to be first item at each meeting
- Affected member leaves room for discussion/decision
Further and useful commentaries on Conflicts of Interest rules are outlined in the attached Appendix to this topic.
Conflicts of Interest - Appendix
The Auditor General has provided some guidance for public bodies on Conflicts of Interest. This includes some case example and a list of recent Court decisions:
The Wellington City Council has provided a Conflicts of Interest for Community Board members. The update relates to the Local Authorities (Members Interests) Act 1968 but it is a useful summary: