Governing with integrity: John Ryan on public sector challenges

New Zealand’s public sector is often described as one of the most trusted in the world. Yet, as former Auditor-General John Ryan recently reminded directors, “being explicit about building and maintaining public trust is a fundamental role for those charged with governance”.

Speaking at an Institute of Directors’ webinar, A watchful eye: John Ryan on challenges in public sector governance, he highlighted the unique challenges faced by boards and the critical importance of embedding integrity at the heart of governance practice.

Ryan identified five contextual challenges that shape governance in the public sector: the scale and complexity of the sector; the strategic tension between commercial returns and public good outcomes; the political overlay; the demands of public accountability; and the breadth of stakeholders to serve.

As he explained, the public sector makes up about a third of the economy. Council-controlled organisations are often a major service provider in regions, and even small agencies can have a big footprint.

Boards are often charged with delivering a financial return while simultaneously meeting wide-ranging and sometimes ill-defined social and community expectations, as well as trying to meet the balance between short-term results and long-term outcomes. “Sometimes there isn’t clarity about what success looks like,” Ryan observed.

Maintaining strategic direction can also be hard, especially with changes in ministers or councils, and short political cycles colliding with the long-term horizons of infrastructure and stewardship.

Public accountability brings another level of complexity. Unlike the private sector, boards are accountable not just to shareholders but ultimately Parliament and the public, facing oversight from the Auditor-General, Ombudsman and monitoring agencies, and being subject to the Official Information Act.

As Ryan cautioned, “There is no de minimis with public money”. Every decision is open to scrutiny, whether it involves billions of dollars or a small procurement choice.

And finally, directors must manage an unusually wide stakeholder environment, including ministers, councils, iwi and Māori partners, monitoring agencies, select committees, local boards and the media.

To address these challenges, Ryan pointed to several strategies that align closely with the integrity framework developed by the Office of the Auditor-General. Boards need clarity on strategic direction with the owner, whether that is a council or a minister.

Directors must be explicit about the mandate, priorities and measures of acceptable performance. That means balancing social and commercial outcomes and ensuring the board knows how to respond when those expectations shift.

Clear accountability processes are equally critical. This includes the flow of information, escalation pathways when issues arise and the role of monitoring agencies. The integrity framework emphasises that transparency and assurance are at the heart of maintaining trust. Boards must also map and manage their stakeholders.

Not all stakeholders carry equal weight, but directors need to identify who can influence the organisation and how relationships will be nurtured. The framework’s call to “prioritise relationships” is key – building trustful, respectful and open engagement makes it easier to navigate conflict when it arises.

Finally, Ryan emphasised integrity management. “In public life as in private life, trust is built on whether you are seen as honest and operating with integrity,” he said.

Boards need to treat managing the integrity of their organisations systematically, much as they would the quality of a manufacturing process.

The Auditor-General’s framework offers nine building blocks, ranging from values and codes of conduct to assurance and accountability, that boards can adopt to embed integrity throughout the organisation.

What becomes clear is the scale and complexity of the sector demand boards that can provide consistent ethical leadership.

The tension between commercial and public good outcomes requires directors to hold fast to purpose and values. Political overlay can only be managed with integrity systems that endure beyond the electoral cycle.

Public accountability is, in essence, an integrity test of how resources are used, how decisions are made and how transparent the organisation is willing to be.

Stakeholder management is about building trustful relationships, including with mana whenua and Treaty partners, that demonstrate respect and an enduring commitment to working constructively together.

The integrity framework’s “six ways of working” – ongoing commitment, building alignment, prioritising relationships, providing transparency, making it easy and being inclusive – are practical tools that can be directly applied to these governance challenges.

For directors, governing with integrity means asking different questions around the board table:

• • Are the mandate and performance expectations with the minister or council clear?
  • Are accountability processes working in practice, not just in theory?
  • How are relationships with iwi, councils, and stakeholders being managed to build long-term trust?
  • What are the key integrity risks and are they governed explicitly at board level?
  • How is integrity being lived, not just written, in values, codes and culture?

These questions do not sit outside governance – they are governance. Public sector boards carry immense responsibilities.

As Ryan reminded, these are not trivial appointments; they demand deep commitment, literacy in regulation and accountability, and the courage to govern with integrity, even under pressure.

The good news is that the tools are there. By actively managing integrity and using the resources that are available, including the integrity framework, Ryan says boards can close any “integrity gap” between values and practice, ensure decisions are transparent and principled, and embed a culture where trust is earned and maintained.

Directors are not only tasked with governing effectively but with safeguarding the trust New Zealanders place in public institutions. That trust is one of the country’s greatest assets and one that cannot be taken for granted.