A seat at the water table

Water is one of Aotearoa New Zealand’s most precious taonga. It underpins the health of our people, the productivity of our economy and the resilience of our environment. But the way we manage it – or fail to – has profound implications for generations to come. That’s why the reform of water service delivery is one of the most significant governance challenges facing local government today.

The Local Government (Water Services) Bill provides councils with the flexibility to choose from a range of delivery models: council-controlled organisations (CCOs), consumer trusts or in-house delivery. But with this flexibility comes complexity – and the scale of what’s at stake means that getting the governance right isn’t optional, it’s essential.

While much of the public conversation has rightly focused on infrastructure investment and regulatory standards, the Institute of Directors (IoD) believes governance must also be brought to the fore. Without skilled, independent and future-focused governance, even the best intentions can unravel.

Decisions made by water service providers won’t just affect operational outcomes – they will shape the affordability, safety and sustainability of our water systems for decades. That requires deep expertise in infrastructure, finance, environmental risk and regulatory environments. Just as critically, it demands directors who can think long-term, act independently and provide strategic leadership in an increasingly complex and politicised environment.

Speaking at the March 2025 water governance panel hosted by the IoD, Water New Zealand, KPMG and Dentons, Chair of the NZ Infrastructure Commission Raveen Jaduram CMInstD said:  “[Water is] a public health business. It’s an environmental business. It’s a customer-focused business. It’s a sustainability business. It’s a construction business. It is capital intensive.”

As Jaduram emphasised, water services span an extraordinary breadth of complexity. That complexity is both technical and human, requiring not just engineering and financial literacy, but the ability to navigate contested values, political scrutiny, community expectations and public health responsibility.

With the potential for up to 50 new boards to be established across the country, many directors will be stepping into uncharted waters.

“I think an important characteristic of those directors will be to have a curious mind and to ask questions,” says Jaduram.

This mindset – curiosity, humility and strategic thinking – will be essential as new boards work to establish trust, cohesion and clarity of purpose.

Similarly, panellist Linda Clark MInstD, TVNZ board member and Dentons partner, noted: “The single biggest challenge will be finding common purpose and actually understanding what that purpose is.”

Clark highlighted the unique dynamic of starting from scratch – no institutional memory, no inherited board culture and no legacy frameworks to lean on. “What I see in groups of individuals is, even when they use the same language, they’re meaning different things. It takes a while to shake that down.”

Boards will need to quickly build cohesion around a shared vision, while building a culture of transparency and accountability from day one. It’s a governance startup but with very real, very public consequences.

The scale of reform means hundreds of new governance roles may be needed. That presents a significant challenge for councils already struggling to attract skilled candidates for existing boards and committees.

As noted in our submission on the Bill, director appointment processes vary widely across the country from entirely internal to open and transparent. Going forward, that inconsistency won’t be sustainable.

Speaking on the panel, Julian Smith CMInstD, Director at Watercare Services, emphasised: “The directors will need a clear understanding of what an asset plan is, how it works, how it’s funded, how it is prioritised.”

Smith stressed the need for capability in capital planning and asset management – areas where even experienced directors may need further upskilling to meet the scale of the demand. Every new entity will face infrastructure deficits so directors must be prepared.

As the new water organisations take shape, industry expertise will be essential at the board table. Engineers, sustainability leaders and infrastructure specialists bring a practical understanding of complex systems, long-term asset planning, and regulatory environments – all vital for governing services that are capital intensive, climate-exposed and critical to public health. Their insights will be especially valuable in navigating the intersection of technical delivery, regulatory standards and environmental stewardship.

But governance is more than technical know-how. It’s about strategic leadership, understanding risk in a broader context and making decisions through a governance lens – one that balances commercial discipline with public accountability.

The governance of water services will not happen behind closed doors. These organisations will operate under public, media and political scrutiny – especially when things go wrong. And they will.

Speaking on governance culture during transition, KPMG Infrastructure Advisory Partner Mair Brooks said directors should “be prepared for a high level of scrutiny, transparency and accountability. It’s going to be a rollercoaster.”

From community backlash over rates and service levels to pressure from councils to reprioritise funds or reverse unpopular decisions, tensions are inevitable.

This environment requires directors with resilience, judgement and strong communication skills. It also calls for independent leadership that can stand firm on long-term outcomes when short-term political pressures mount.

Jaduram’s stark reminder that “you can kill someone” cut through any doubt about what’s at stake. Decisions around water services aren’t theoretical – they’re literal matters of life and death.

In-house governance models pose a particular risk if appropriate oversight mechanisms aren’t embedded. While they preserve local ownership, they may also expose decision-making to political influence, lack of challenge and minimal scrutiny.

That’s why the IoD strongly supports the use of independent chairs – particularly for in-house business units. As seen in Audit and Risk Committees across the country, and promoted by the Office of the Auditor General, independence adds rigour, transparency and assurance, without undermining council accountability.

Boards, even internal ones, need the ability to make evidence-based decisions, navigate long-term risks and maintain compliance across a regulated environment. An independent chair provides focus, neutrality and technical depth – and signals to the public that governance is robust.

The proposed reforms also enable delivery through consumer trust models – a familiar structure from energy and community services. While localised and democratic, the trust model comes with governance trade-offs.

As the Bill currently stands, there are no competency requirements proposed for elected trustees. That means there’s no guarantee of financial, infrastructure or public health expertise – despite the critical decisions they’ll be asked to make.

The IoD has advocated for stronger safeguards here: possible governance education requirements, clearer eligibility rules and restrictions on elected members or staff serving as trustees. Independence and competence must be as central to the trust model as to any other.

One of the central governance principles is this: form should follow function. Governance structures should be designed to serve the purpose and complexity of the organisation, not retrofitted to political realities.

Water services are long-term, capital intensive and critical to community wellbeing. Their governance requires structure, clarity and capability that can deliver, not just comply.

That’s not a wish list – it’s a baseline.

One of the biggest governance challenges is the mismatch between long-lived assets and short-term political cycles. Assets can last for 100 years. Election cycles last for three. Planning must go further. Planning certainty is crucial. The IoD supports longer terms for both local government and directors to help bridge that gap.

Mechanisms such as staggered appointments, clear role demarcation and transparent expectations and appointment processes help form the foundation of governance resilience.

At its best, governance is a quiet enabler – supporting effective delivery, strategic foresight and public trust. At its worst, it is the risk: slowing down progress, distorting priorities or undermining confidence.

Directors who join the new organisations should have their eyes open. This is not a space for token appointments or untested skills. It’s a space for professional, prepared and principled governance.

New Zealand has an opportunity right now to establish a governance foundation for water services that’s built to last. That means the right people, in the right structures, with the right support.

Water governance isn’t just a technical issue; it’s a trust issue. And trust starts with capability.

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If you want to see these reforms succeed, consider stepping up. The IoD’s Governance Essentials courses and Chartered Member pathway are a great place to start. With the right preparation, technically skilled professionals can do more than contribute – they can lead. After all, if you care about how these new organisations perform, why not put yourself in the driver’s seat?

This article was originally published in New Zealand Water Review magazine, Edition 2, 2025.