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100 Molesworth Street, Thorndon 6011
PO Box 3928, Wel ington 6140, New Zealand
Telephone: +64 4 917 1500
Email: [email address]
Website: www.oag.govt.nz
19
June 2020
File Ref: LAMIA379
Christchurch City Council
Attn: Ian Thomson, Special Counsel Governance
Legal Services Unit
Via email:
[email address]
Dear Ian
LOCAL AUTHORITIES (MEMBERS’ INTERESTS) ACT 1968 – REVIEW OF POLICY FOR THE
APPOINTMENT AND REMUNERATION OF DIRECTORS TO COUNCIL ORGANISATIONS
We refer to your letter of 10 June 2020.
On behalf of al members, the Christchurch City Council has requested a declaration under section 6 of the
Local Authorities (Members’ Interests) Act 1968 (the Act) to enable al Council ors to be involved in decision-
making about the Council’s Policy for the Appointment and Remuneration of Directors to Council Organisations
2017 (remuneration policy).
For the reasons explained below, we have decided to issue the declaration allowing al Council ors to discuss
and vote on the remuneration policy, despite their direct or potential financial interest.
We have issued the declaration on the basis that we are satisfied that it is in the interests of the electors or
inhabitants of the area that all members be allowed to participate in the remuneration policy review.
The law
The ‘non-participation rule’ in section 6(1) of the Act prohibits a member of a local authority or its committees
from discussing or voting on a matter before the authority in which the member has a financial interest, other
than an interest in common with the public.
Under section 6(4) of the Act, the Auditor-General can grant a declaration that the non-participation rule will
not apply to a matter or class of matters if he is satisfied that:
•
applying the rule would ‘impede the transaction of business of the Council’; or
•
it is ‘in the interests of the electors or inhabitants of the district of the local authority or of the area under
its jurisdiction’ that the rule should not apply.
The declaration requested
In your letter of 10 June 2020 you have requested, on behalf of all members, a declaration under section 6(4).
The scope of the declaration sought is to enable all Council ors to participate in the discussion and voting on
whether or not to amend the remuneration policy. This discussion is scheduled to be held at a Council meeting
on 25 June 2020 (June meeting).
Under the current remuneration policy, Council or-directors appointed to an external organisation
1 of the
Council in their capacity as an elected member of the Council do not personally receive any fees for that
appointment.
2 Instead, the external organisations donate equivalent sums to organisations identified by the
Council.
3
One of the options to be discussed at the June meeting is resetting the remuneration policy to permit
Council or-directors to retain the fees paid by the external organisations.
1
“External organisations” include Council Organisations, Council-controlled Organisations and Council-controlled Trading
Organisations), [Clause 9.12 of the Policy for the Appointment and Remuneration of Directors to Council Organisations].
2 Clause 9.10 of the Policy for the Appointment and Remuneration of Directors to Council Organisations.
3
Clause 9.11 of the Policy for the Appointment and Remuneration of Directors to Council Organisations.
You have told us that:
•
all members may have a financial interest in the outcome of this discussion given all members could
potentially be appointed to an external organisation at some point in the future; and
•
the participation of all elected members in the decision-making on the remuneration policy is more
important than their individual interests.
Our view
In our view, it is likely that all Council ors have a financial interest in the outcome of the discussion about the
remuneration policy. Those council ors who are wil ing to be appointed as directors of an external organisation
have an interest in the policy on the fees paid to those positions. Members who are not currently Council or-
directors could be appointed to the boards of external organisations and entitled to any remuneration payable.
Therefore all council ors are potential y affected by any change to the remuneration policy.
This means that al members are potential y prohibited from participating in decision-making about the policy
unless we are satisfied that there are grounds to issue a declaration under the Act.
There is an exception in section 6(3)(c) of the Act that applies to the election or appointment of a member of a
local authority to any office, even if the member may be remunerated or receive an allowance for that role.
We do not think the exception applies here. It is for the narrower situation of deciding which particular
council ors should be appointed to other bodies, rather than the broader issues covered by the remuneration
policy (particularly whether or not the member wil receive a financial benefit for performing the role).
In this case, the remuneration policy covers significant policy matters concerning Council ors’ contributions of
their skil s, knowledge and experience to guide external organisations. We think that it is in the interests of the
community for al council ors to be able to participate in decision-making about the fees payable for Council or
appointments to commercial boards, despite their direct and potential financial interests. We have granted
similar declarations for other councils considering their remuneration policies for external organisations.
Declaration
The Auditor-General hereby issues a declaration under section 6(4) of the Act authorising al members of the
governing body of the Christchurch City Council to participate in decision-making regarding the Council’s 2017
Policy for the Appointment and Remuneration of Directors to Council Organisations, on the grounds that it is
in the interests of the electors or inhabitants of the area that they be al owed to do so.
If the 2017 iteration of the Policy for the Appointment and Remuneration of Directors to Council Organisations
is amended or superseded, the declaration wil not apply to any discussion or voting on the amended or new
policy.
We would be grateful if you would inform the mayor and council ors of the contents of this letter.
If you have any queries about this matter please feel free to contact me or Miriam Davie, Senior Solicitor on
021 222 6220.
Yours sincerely
Melanie Webb
Assistant Auditor-General, Legal Policy and Inquiries Group
Copy to:
Andy Burns (Appointed Auditor)
Jonathan Keate, Office of the Auditor-General (Sector Manager)
2
