August 26, 2004
Opportunity Exists To Strengthen Public Authority Boards Of Directors
Because as many as 40 percent of the board of director positions for the State’s largest public authorities are vacant or filled by people serving expired terms, there is an opportunity to substantially strengthen the boards by appointing new directors, according to a report issued today by State Comptroller Alan Hevesi.
“Public authorities operate largely outside public scrutiny, which makes a strong board of directors absolutely crucial for accountability,” Hevesi said. “Over the years, there have been far too many instances where public authority employees violated the public trust because of too little oversight. Broad-based legislative reforms are badly needed, but improved governance by the boards of directors is a good place to start.
“With so many vacancies and potential vacancies on the largest boards of directors, the State has a unique opportunity to recruit board members with the skills to provide better oversight of public authorities and protect the interests of the State and New Yorkers who pay for authority services,” Hevesi said.
The study examined 409 board positions at 58 of New York’s largest public authorities, which control $27 billion in revenues, as well as attendance at board meetings. Public authority debt exceeds $114 billion, the Comptroller’s Office reported earlier this year. The majority of the information in the study comes from reports filed with the Office of the State Comptroller by the authorities for their fiscal years ending in 2002, the most recent year for which complete data was available.
According to the study, of the 58 public authorities reviewed, the Governor is responsible for appointing nearly 75 percent of the 409 board positions, including individuals serving in an ex-officio capacity as a result of their appointment to a leadership position in another State entity. Leaders of the Senate and Assembly are responsible for appointments to fill another 22 positions each, designees of local officials are appointed to fill 54 of the positions, and the State Comptroller recommends appointments for four board positions.
The report noted that attendance at board meetings is generally very good, though two authority boards did not meet during 2002, and three boards held no meetings in 2003. Overall, the attendance rates at board meetings for both 2002 and 2003 were high — 86.3 percent and 86.4 percent, respectively.
Comptroller Hevesi joined with Attorney General Eliot Spitzer earlier this year to propose the Public Authority Reform Act, which includes provisions to strengthen governance of New York’s public authorities, such as requiring the rotation of auditing firms, independent board members, and definitions of causes for removal of board members.
“The people running public authorities control a tremendous amount of money and resources but with too little oversight, too little accountability, and too little guidance of best practices. The State should recruit individuals to serve as members of public authority boards who are committed to providing taxpayers with the best services possible,” Hevesi said.
Hevesi also has been a strong advocate for improved governance in the private sector, where as a co-founder of the National Coalition for Corporate Reform, he has pushed for greater accountability in public companies.
In May 2004, Governor Pataki appointed a Public Authority Governance Advisory Committee chaired by Ira M. Millstein. The Commission was charged, in part, with implementing a directive to 31 State public authorities to follow model corporate governance principles based on best practices of private corporations and provisions of the Federal Sarbanes-Oxley bill.
The Draft Interim Report of the Millstein Commission calls for governance committees of authority boards to consider recommending to the Governor and Legislature the preferred experience and qualifications for board appointees. The findings of this report suggest the opportunity exists to use those recommendations to fill board vacancies and expired terms with individuals who will help improve authority governance.