Owner’s Expectations Manual for Crown Research Institutes

2. CRI FRAMEWORK

Crown company model

During the 1980s, the government began using the company model as part of its broader state sector reforms.

Under the company model, Crown-owned companies:

• operate at arm’s length from the government (unlike departments, Crown-owned companies are not part of the Crown but are owned by the Crown),
• have independent boards that are accountable for the companies’ performance,
• are separate legal entities with directors who are responsible for overseeing the management of the business and affairs of the companies, and
• • are subject to the financial reporting and other requirements applying to all companies, together with any relevant sector-specific legislation (including the CE Act and the CRI Act for CRIs).

CRI model

As part of reforms to the science sector, the CRIs were established in 1992 as limited liability companies under and subject to the Companies Act.  Until then, government departments (principally the Department of Scientific and Industrial Research) undertook the activities that are now carried out by the CRIs.

Each CRI is also subject to the CE Act and the CRI Act. These Acts address the ownership, governance and public accountability arrangements for CRIs.

Under the CRI model:

• the purpose of each CRI is to undertake research,
• each CRI, in fulfilling its purpose, is to operate in accordance with the following principles:
  • the research that it undertakes should be undertaken for the benefit of New Zealand,
  • to pursue excellence in all its activities,
  • in carrying out its activities, to comply with any applicable ethical standards,
  • to promote and facilitate the application of its research and technological developments,
  • to be a good employer,
  • to exhibit a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage those interests when able to do so, and
  • to operate in a financially responsible manner so that it maintains its financial viability.

CRI governance structure

The Crown is the sole shareholder of each CRI and acts to protect its investment on behalf of the people of New Zealand.

Each CRI has two shareholding Ministers: the Minister of Research, Science & Technology and the Minister of Finance, each of whom holds 50% of the company’s shares.

Shareholding Ministersappoint a board of directors to oversee the management of the business and affairs of each company.  CRI directors are subject to a number of duties under the Companies Act, including the duty to act in the best interests of the company.  The board generally delegates a number of its powers to the company’s chief executive officer (CEO) to enable him/her to carry out the tasks of managing the company. However, the board generally remains ultimately responsible for the exercise of those powers.

Officials at CCMAU and the Treasury monitor CRIs on behalf of, and provide advice to, shareholding Ministers.  The respective role of shareholding Ministers, boards, managers and officials is shown in Figure 1 below.

Figure 1 CRI governance structure

Role of the CRIs in the science system

The current government's agenda is to continue New Zealand's transformation to a high-value, knowledge-based economy. CRIs have a key role to play in achieving this objective.

The government sees CRIs as agents for transformation by creating the value that will create advantage for New Zealand. The importance of CRIs to New Zealand as repositories of nationally important skills and capabilities is the reason why the government will continue to own them. The government sees CRIs as part of New Zealand’s national public research infrastructure and expects them to operate always with the delivery of New Zealand benefit at the forefront of their thinking.

A strong focus of the government’s economic transformation agenda is the strengthening of links between CRIs, tertiary education institutes (TEIs) and firms.  Such interconnectivity is seen as vital for the successful functioning of New Zealand’s innovation system.  There is an enduring expectation that CRIs will strengthen their research and commercialisation linkages with TEIs and deepen the quality of their engagements with industry stakeholders.

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