Written by Ronnie Dunn
The stated purpose of the Public Authorities Act is to provide uniform regulation of the management and governance of public authorities. Whilst the spirit and intent of the law is certainly there, what happens in practice is not always aligned.
Public authorities are designed to help the Government achieve its policy objectives when those objectives are more effectively achieved by separate legal entities rather than through the Civil Service.
The Act states that it is the duty of a public authority to conduct its affairs in a responsible financial manner and operate as a profitable and efficient business that contribute to the revenue of core government or, at least, break even in its operations.
Whilst not explicitly stated, the Public Authorities Act also seeks to clarify roles and responsibilities among the principals of a Public Authority. The three main areas clarified are the roles of the Cabinet, the role of the Board and the role of the Chief Executive Officer.
Notwithstanding the provisions of the Act, we still see several scenarios where Boards get involved in operational matters, undermine the executive, and create conflicts of interest contrary to the Standards in Public Life Act, the Authority’s own Act and other overarching legislation. CEOs often feel powerless to address these situations due to the power imbalance and fear of victimization.
The prevalence of this dysfunctional relationship stymies the organization’s ability to achieve the goals specified in the Public Authority’s Act, and to deliver shareholder value to the Cayman Islands public.
The result is an organization that: becomes a burden on the public’s purse due to the inability to efficiently and effectively deliver services; fail in its mandate, underachieves, or worse, becomes a liability to the people of the Cayman Islands.
When the system operates as designed, the people elect the government to provide oversight of the approximately two dozen statutory authorities and government owned companies (SAGCs) currently existing. The government then appoints a Board of Non-Executive Directors to provide governance functions for each SAGC. That Board is responsible for appointing a Chief Executive Officer, Managing Director (or head of the entity by whatever name called).
Members of the government are frequently elected on manifestos, those manifestos are to be translated into policies, those policies inform budgetary appropriation and services the government will require from the SAGCs for which it was granted oversight. The policies of the government are to be conveyed to the Board in writing via the responsible Minister.
The Board is then duty bound to ensure this policy is carried out and charges the CEO with its execution. This is conveyed in Board Directives, Performance Agreements, or policy amendments.
Transparency is a crucial part of this framework; however, unfortunately, in the current context, what we largely see are WhatsApp communications, telephone calls, or “not for the Minutes” conversations in the Boardrooms where the wishes of the government are conveyed. This situation exposes the CEO and the organization to a myriad of potential issues which manifest themselves in scandals, adverse audit findings and even criminal proceedings.
A significant flaw in the current framework is the lack of formal qualifications required for many of the individuals who sit on the boards of multimillion dollar SAGCs. These individuals are not required to undergo formal training, they lack governance experience, and many have never even read the Public Authorities Act.
It therefore comes as no surprise that these individuals seek to get into procurement activities (for which the Act does not define a role for the Board) Human Resource matters (for which the CEO is responsible) and day-to-day matters at an operational level.
The development of strategic plans, effective performance management of the CEO, ensuring the risks and reputation of the entity are suitably managed, reviews of the organization’s principal policy documents (such as the Human Resources Manual), and the achievement of service and ownership performance goals fail to feature as discussions in the Board room.
The Government can improve this situation by ensuring individuals appointed to Boards are suitably qualified, or there is a defined orientation programme afforded that can introduce members to performance management, strategic planning, Board communication, discharge of roles and responsibilities and the appropriate levels at which to govern the organization to meet their fiduciary responsibilities. Providing a source of ongoing support to Board members is also useful as unfamiliar situations arise.
Ronnie Dunn has over 10 years’ experience sitting on the Boards of various SAGCs including the National Roads Authority, the Civil Aviation Authority, the Utilities Regulation and Competition Office, and the Board of Governors for UCCI. He has also supported and presented information to other Boards to assist with CEO performance management, preparation of HR Manuals, development of Board Policies and Procedures, Board Communication Framework, and strategic planning. His 20 years of Public Sector experience provides crucial insights and backgrounds to solving many problems encountered by the Boards of SAGCs.
Written by Ronnie Dunn