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August 18, 2010

Task force on public authority reform says those appointing board members also owe fiduciary duty; warns boards against reliance on senior staff

Atlantic Yards Report

As I reported last month, despite the expansion of the Authorities Budget Office (ABO) as part of 2009 public authority reform legislation, corporate governance expert Ira Millstein, who led the development of the law, thought the ABO was woefully understaffed.

This week, the Governor’s Task Force on the Implementation of the 2009 Public Authorities Reform Act (PARA), chaired by Millstein, issued a report (embedded below) calling for “substantial increases to the funding and staffing of the ABO.”

But it also called for several other reforms, a few of which seemed to be a response to situations like Atlantic Yards.

Notably, the Task Force wants:

  • those who appoint board members to face a fiduciary duty (which means they'd owe loyalty, for example, to transit riders rather than real estate developers)
  • board members limit reliance on senior staff (who, in the case of AY, run Empire State Development Corporation policy)
  • boards to implement risk management polices (which might lead the ESDC to produce an cost-benefit analysis that allows for delay)

Expanded fiduciary duty

As a main recommendation, the Task Force asks that “the ABO take action to ensure that the individuals responsible for appointing and designating directors to the boards of public authorities respect the fiduciary duty owed by their appointees and designees; and that the Public Authorities Law be amended to establish a fiduciary duty owed by the individuals holding appointing and designating powers.”

In other words, just because (for example) Mayor Mike Bloomberg appoints members of the Metropolitan Transportation Authority, he should recognize his appointees should be responsible to the interests of the MTA, not the interests of the mayor.

That would be a significant change, given that Bloomberg's appointees led the justification of the MTA's June 2009 renegotiation of the Vanderbilt Yard deal.

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NoLandGrab: The horses left the barn last year, and Albany just remembered, "hey, we have a barn."

Posted by eric at August 18, 2010 10:53 AM