Selection Processes and the Impact of Politics in the

Three sets of questions in my interviews explored director selection processes in New Zealand Crown Companies. The first set focused on both selection processes and the impact of politics. The second set looked specifically at the Crown Company Monitoring Advisory Unit (CCMAU) and its role in selection and appointments, and the third set explored the influence of Chief Executive Officers (CEOs) in director selection.

There were six questions within this set: the first two explored director selection within the private and public sectors; three other questions explored politics and government because of the Crown Company focus of this research; the final question allowed participants to review director selection process and recommend changes if they considered some were needed.

CCMAU was often mentioned in responses, even when the question did not specifically refer to CCMAU. Participants acknowledged that the Crown Companies are managed by CCMAU but with political influence entering the process through the shareholding minister and Appointments and Honours Committee. In addition, even though CCMAU contributes to the appointments process by recommending possible director candidates, the Appointment and Honours Committee (consisting of government members of parliament) makes final decisions about board appointments. This means that the government of the day has considerable influence. Thus, it is possible that political affiliation might override the nominees’ other attributes in terms of skill base, diversity and industry knowledge that would make them suitable Crown Company appointees.

In the interviews, there was a consistent reference to political influences and a regular acceptance of this being an inevitable factor – even though a high proportion (12) of participants expressed a wish for less political influence. The impact of political influence was underlined by the director who referred to being part of a political process and not being above it. Statistically, females account for over a third of appointments to Crown Company boards (CCMAU, n.d.). This substantiates McGregor’s observation that Crown Companies are a better avenue into governance for women. Nevertheless, the 50% target which was the basis of (then) Prime Minister Jenny Shipley’s “radical experiment on the nation’s boardrooms” (McGregor, 2000, p. 129) is still a long way off.

When participants were asked about the changes they would like regarding director selection, a desire for less political influence was balanced by comments expressing a wish for more formal and transparent processes in how appointments are made. The two sets of responses overlapped. For instance, in relation to a desire for less politics, one participant referred to the need for less government interference and more competence focus. In relation to a need for more formal processes, another participant commented on the need for more formal processes and the skill needs of the board. Participants’ views hinted at both McGregor’s (2000, p. 134) comments regarding the “covert” nature of appointments to Crown Company boards, and Leighton and Thain’s (1993) call for more proactive, planned approaches to director selection (p. 25).

However, contrary to the previously mentioned set of responses, comments were made that claimed adequate transparency in the government appointment process, with participants suggesting that this was largely a consequence of the transparency provided through the CCMAU process: CCMAU documentation outlines how appointments are made and what candidates need to do to register their interest or availability. That said, we should not lose sight of the possibility that the directors in my study may hold the view that transparency is adequate precisely because they have fared well (become directors) under that system.

Participants in my study spoke of political influence in both positive and negative terms. Crown Company directors may be appointed because of their political ties (McGregor 2000) – an example of which was described during one of the interviews – and one would expect those incumbents to view the exercise of political power positively. But the interview data suggests that political affiliations may be less important than the required skill-set. For example, two male Crown directors made specific reference to their having served more than one government across the span of their Crown Company experience. Other participants pointed out that, while at times there are changes when new governments come in, it is customary for appointments to roll over until their maturity date. Regardless of when the new appointments are made, the CCMAU documentation states that the minister makes an appointment “based on the best- qualified person who is defined as the candidate whose skills and experience best meet the responsible Minister’s assessment of the skills profile for the vacancy” (CCMAU, 2002, June, p. 18). To what extent the minister’s assessment is objective can be at issue, and that offers leeway for political influence (McGregor, 2002) challenging claims to transparency. Exploration of political intervention within the ministerial prerogative was not a feature of my New Zealand study. However, the potential for government manipulation of board appointments is inherent in the current Crown Company selection process, and there has been recent criticism of political patronage within the Canadian system (Conacher, 2009).

Because of the confidentiality around deliberations of the Appointment and Honours Committee, there may be a sense that the transparency of any preceding processes is compromised. This is especially the case because the Appointment and Honours

improve overall transparency and reduce political influence – but for a government controlled operation, that change is unlikely.

As a general observation, the selection processes for New Zealand Crown Companies is inevitably political. Those who wish to serve as directors of those companies must balance the political overlay with the requirement to return a profit to shareholders through good governance practice. Responses from participants in this research revealed an understanding of these composite factors in Crown Company board service.

5.6.2 CCMAU’s Involvement in Director Selection within the New Zealand Crown