A mockery of governance

Richard Thomson
Richard Thomson
The frustration from Southern District Health Board member Richard Thomson is palpable.

Once again he has slated the lack of information provided to board members, this time to the hospitals' advisory committee meeting in Invercargill this week. Once again his frustration is perfectly understandable. Board and members of board committees cannot do their jobs if they are kept in the dark. Brief reports with next to no detail make a mockery of the duty of board members to govern.

Mr Thomson has every right to be touchy on this point. It was he who came in for some of the blame for the Michael Swann debacle because he was chairman of the Otago District Health Board for part of the period of Swann's massive fraud. That was one of the supposed reasons for him being dumped by the Government as chairman, even though the rorts began before his watch and were eventually revealed while he was in charge.

On Wednesday, advisory committee chairman Paul Menzies told Mr Thomson he ought to have "some faith" in management bringing issues to the advisory committee's attention when it was warranted. Mr Thomson's response was that he did not share Mr Menzies' confidence.

Why should he? For a start, senior management missed Swann's misdemeanors for years.

Here was a monumental issue not brought to the Otago board's attention. In those days, the board did receive more details and it could well be the board itself lacked the knowledge and skill to pick up that something was wrong. But at least they had an opportunity to question specifics.

Good governance requires both a fair degree of information and a fair amount of questioning and scepticism. Effective governors, while supportive of chief executives and top management, will also be shrewd and quizzical.

They will recognise the inevitable protective and self-interested angle of those producing reports and will read behind words and through figures. Otherwise, what is the point of governance? Why not, as Mr Thomson suggested, just have a series of tick-boxes? Why not just go through the motions?

The 1990s and the first decade of the 2000s were eras of extraordinary power for chief executives. For many companies and organisations, such as local authorities or schools, all information - and therefore most power - was filtered through chief executives, with perhaps chief financial officers also having significant input. That had advantages and sheeted home responsibility to the CEO. But it narrowed points of view. Chief executives choose what they include and exclude in their reports and therefore have strong means of manipulation.

While this system remains the foundation of governance, it has come to be realised that "governors" must have their antennae working and must be open to perspectives other than that of the CEO. They can be more active and can learn more about their organisation beyond the board papers.

It does little good to plead ignorance. Just ask Sir Douglas Graham or members of the boards of many a finance company. These provide examples of why board members are "derelict in their duty" if they do not insist on sufficient information and why their faith in management must be balanced by wariness. The Otago Rugby Football Union situation is another example of failed governance. Board members failed to act soon enough on the parlous financial state - all the blame cannot be put on chief executives.

The standard way to keep governors at arm's length was for the chief executive to insist on a clear distinction between governance's "policy" role and widely defined "operations", the responsibility of management. In practice, there is plenty of grey between the two, and it is now more often recognised that governance responsibilities are not as narrow as they were previously thought.

Today's boards and councils have to work in a robust dance with chief executives, performing as a team while maintaining a discerning and perceptive overview. As for the health board, Mr Thomson needs to be backed vigorously by other board members, who have so far been too compliant and inactive, because good governance starts with adequate information.

 

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