ntroduction

A cursory glance at the language commonly used in public and private sector corporate
governance guidance might persuade the reader that they are not that different. Today it is
commonplace to read of the work of boards, audit committees, non-executive directors, for
example, across both contexts. However, were an individual from the private sector thinking
of putting themselves forward for consideration for a public board appointment, s/he would
do well to have a closer look at some of the dynamics at play in the public sector that
differentiates it from the private sector.
A more detailed, critical review would reveal that, though similarities in language are
apparent, oversight and accountability arrangements differ, in some cases significantly.
Articulating the differing context of the public sector is nothing new: writing in a CIPFA
publication almost 20 years ago, one author[1] noted specifically (1994: 2): It is perhaps too
obvious to state that the private and public sector are different. Indeed the first thing to be
said about the public sector is that there is no such thing. There are a series of public
services which are widely diverse and have their own unique features and each is governed
by different statutory and managerial frameworks. A further complicating factor is
mentioned by another author[2] in the same publication, when he highlights another of the
key characteristics that distinguishes the public sector from the private sector: the issue of
political choice, when considering how those public services are delivered. The complex
context of the public sector has, if anything, become even more pronounced since these
observations were first made in 1994.
The purpose of this article is to thus draw attention to some of the more recent guidance in
the field with a view to highlighting how this complexity can be purposefully approached
from a practical standpoint. It will discuss how the public sector accountability arrangements
influence corporate governance, so that those thinking about undertaking such roles become
aware of some of the challenges they may potentially face. Any new appointee faces the
initial challenge of understanding where their particular board is located on the broad
spectrum of accountability and oversight arrangements - this article aims to introduce the key
aspects of accountability architecture that faces those charged with governance in the public
sector.
Influences and defining characteristics of public sector corporate governance
A previous article[3] in this journal pointed out that the approaches to governance in the
Republic of Ireland and Northern Ireland have characteristics in common: they are principles
based and broadly follow from the provisions of the Combined Code and UK Corporate
Governance Code, adapted for a public sector context and they cover some common core
areas. It seems likely that anyone who held public board appointments North and South
would recognise the similarities.
In the Republic of Ireland, the Mullarkey Report[4] remains the authoritative guide to
governance and accountability in Government Departments. While the framework of
accountability is very similar in Ireland and the UK, there are differences in the way
governance operates. Departments in Dublin, for example, do not operate their management
boards with input from non-executive board members (NEBMs). However, elsewhere in the
wide range of both commercial and non-commercial state bodies there are, of course, well

developed board structures. These are covered by the 2009 Code for the Governance of State
Bodies[5].
In Northern Ireland governance has been based on the good practice guidance developed by
HM Treasury for the UK. This was updated in 2011[6] with the intention making central
government boards more business-like and strengthening the roles of NEBMs. For example,
if NEBMs judge that a Permanent Secretary is an obstacle to delivery they can, as a last
resort, recommend his/her removal. Other innovations include Ministers chairing their
Departments board and the appointment of a lead non-executive on each board. The
majority of NEBMs are expected to be senior people from the commercial private sector with
experience of managing complex organisations. The principles of this Code apply to the
other parts of central government such as arms length bodies (ALBs).
The equivalent NI code[7], issued in 2013, contains similar principles of good practice but
does not follow the key innovations in the HM Treasury code. This is the first time
governance guidance in Northern Ireland has significantly diverged. This fact
notwithstanding, similarities between sectors are flagged in the report, referring, as it does, to
the Code drawing on best practice from across the public, private and charity sectors.
However, a key qualifying phrase is used in the context of this aspect of the operation of the
Code, this being where appropriate. It is therefore instructive to review some of the key
detailed, differentiating characteristics of accountability arrangements that complicate the
practice of public sector corporate governance. It is useful to start our discussion with the
work of the board.
In a private sector context, the board is sovereign in all aspects of decision making: it is the
apex of the corporate governance framework. Its primacy is well recognised in all issues
relating to strategy formulation and policy development; this recognition thus makes it the
key organisational actor in setting, framing and having overall responsibility for corporate
direction. In the public sector, by way of contrast, the extent to which a board is subject to
departmental control and oversight often depends on the specific legislation which
established it, as well as the nature of the scrutiny regime operated by the relevant Minister
and the sponsor department. Therefore, one of the key defining characteristics of public
sector boards would be their narrower span of control for two tangible realities of public
sector accountability arrangements: the role of the Minister, introducing the issue of political
choice, referred to earlier, into public sector corporate governance; and the role of the
Accounting Officer (AO). Each of these will now be dealt with in turn.
Ministerial responsibility
Good practice requires that the responsibilities of a public board and its relationship with its
sponsor department should be clearly documented. These are some of the earliest papers
newly appointed board members should expect to see. They will usually reflect the fact that,
central to any boards role, is its collective responsibility for the proper conduct of its affairs
and for performance. However, responsibility and accountability in the public sector are
seldom one-dimensional. The HM Treasury code is careful to spell out that developments in
corporate governance have not changed the long-standing responsibilities and
accountabilities of Ministers and Accounting Officers. Within Departments, for example,
policy is decided by Ministers alone with advice from officials and the Minister is responsible
and answerable to the legislature. A fundamental point is that ALBs and State Bodies are set
up by Ministers who remain ultimately responsible for their performance and for their

continued existence - Ministers have the power (subject to approval by the legislature, if
necessary) to wind up boards.
Against this background, a boards experience of oversight can be strongly influenced by the
interests of particular Ministers, and can alter as Ministers change. Northern Ireland is a
particular case in point. One result of devolution is that Ministers are inclined to take a much
closer interest in their departments ALBs than had been the case under direct rule. This can
be very positive but may also result in board members feeling that their independence is
being eroded.
The Accounting Officer role
Another area of complexity is around the role of the Accounting Officer (AO). The
Permanent Secretary or Secretary General of a government department is designated as the
AO. The AO is personally answerable to the Public Accounts Committee (PAC) of the
legislature for the regularity and propriety of transactions in the accounts for which s/he is
responsible, as well as for economy, efficiency and effectiveness and the stewardship of
assets. This responsibility is taken very seriously and is a key focus for the legislatures
ability to hold departments to account for the resources which they have voted. Mullarkey
observed that the role, as it operates in the UK and Ireland, is unusual even by reference to
systems abroad which are derived from the British system. Moreover, this arrangement
differs from practice in the private sector where such responsibility would normally rest with
the board itself.
In Northern Ireland and the rest of the UK, government departments extend the designation
of AO to the senior official in every public body. It is significant that this designation is given
by the department, not by the board concerned, and may also be withdrawn by the
department. In Ireland, the designation has not been extended beyond central departments and
some offices which have their own Vote. There is a requirement, either by legislation or by
convention, for the Chief Executive Officer or equivalent of the non-commercial state
bodies/agencies/Health Boards/Third Level Education Institutions to appear before the PAC
to give evidence. While this is not the same as AO status, the responsibility to appear in
person before PAC is a significant similarity in terms of the operation of accountability.
Some understanding of the AO role is therefore necessary for those serving on public boards
to have a full appreciation of the accountability environment in which they operate.
There is detailed guidance in Public Financial Procedures[8] and, for Northern Ireland,
Managing Public Money[9]. Both sets of guidance recognise the potential difficulties that can
arise if an AO cannot agree with the Minister on a matter for which the AO is personally
accountable. There are well established, if rarely used, procedures to handle this. There are
similar procedures in the Northern Ireland guidance for AOs of arms length bodies, should
they find they cannot agree with their chair or board on an issue of accountability.
Concluding comments
In summarising the various strands of evidence discussed in this article, they point to a mixed
set of conclusions being drawn. On the one hand, it is apparent that private sector corporate
governance has played a significant role in the development of public sector corporate
governance guidance over time: from the time of Cadbury to the most recent iterations of the
UK Corporate Governance Code, public sector guidance documents in Northern Ireland and

the Republic of Ireland have, to varying degrees of application and adaptation, been
influenced by private sector codes. We see this most tangibly in the commonality of language
and structures utilised, in conjunction with thematic behavioural issues identified as being
important in supporting these structures.
Yet, as we have also seen in the course of this article, the accountability architecture within
which the public sector operates has the effect of making corporate governance structures and
practices different too. Well established accountability mechanisms operated by respective
legislatures mean that corporate governance arrangements need to be nuanced, arriving at
outcomes that accommodate the sector specific realities such as: the ever present influence of
the Minister; the unique role the Accounting Officer plays; and the consequent loss of
sovereignty in decision making a public sector board must deal with as a result of
accommodating these realities. We have, as a consequence, observed some general, core
characteristics of corporate governance in the public sector that are markedly different from
the private sector: the relatively limited span of control of public sector boards; the
uniqueness of the Accounting Officer role, akin to a CEO Plus; and the outworking of these
arrangements eventuating practices that would be considered anomalous when compared with
private sector best practice, e.g. central government departmental boards being chaired by the
Accounting Officer, boards that are moreover executive dominated.
To conclude, whilst the corporate governance language across the public and private sectors
are broadly similar, the accountability realities faced by those charged with governance in the
public sector make corporate governance arrangements distinctly different. Consequently, in
response to the question posed in this article whether corporate governance across the
public and private sectors are as similar as they seem - the answer would be no. But this no is
not a definitive no there are, as we have seen too, clear similarities in terms of the influence
the private sector has had on the development of corporate governance in the public sector.
George Bernard Shaw once observed that England and America were two nations divided by
a common language much the same could be said about public sector and private sector
corporate governance.

[1] Percy, I. (1994), Corporate Governance in the Public Sector, Corporate Governance in the Public Sector,
London: CIPFA.

[2] Hepworth, N. (1994), Principles of Corporate Governance and the Public Services, Corporate Governance
in the Public Sector, London: CIPFA.

[3] Martin, G. and Kane, C. (2012), Public sector corporate governance: Charting a course through recent
developments, Corporate Governance Journal, Dublin: CAI.

[4] Department of Finance (2002), Report of the Working Group on the Accountability of Secretaries General
and Accounting Officers, Dublin: Department of Finance. (the Mullarkey Report)

[5] Department of Finance (2009), The Code of Practice for the Governance of State Bodies, Dublin:
Department of Finance.

[6]HM Treasury (2011), Corporate governance in central government departments: Code of Good Practice
2011, London: HM Treasury.

[7] Department of Finance and Personnel (2013), Corporate governance in central government departments:
Code of good practice NI, Belfast: Department of Finance and Personnel.

[8] Department of Public Expenditure and Reform (2013), Public Financial Procedures, Dublin: Government
of Ireland.

[9] Department of Finance and Personnel (2008, 2012), Managing Public Money Northern Ireland, Belfast:
Department of Finance and Personnel.

John Dowdall CB, is Visiting Professor at the University of Ulster's Department of

Accounting, Finance and Economics, and a former Comptroller and Auditor General for
Northern Ireland.
Gary Martin is a Senior Lecturer in Accounting at the University of Ulster.

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