District health board members throughout New Zealand should be hearing warning bells amid recent events at Hawke's Bay DHB.

Failure to manage members' conflicts of interest - real or perceived - can compromise and even abort commercial contracts; contribute to factions and dysfunction; lead to employment disputes; and culminate in problems so steep an entire board is sacked.

Many health professionals have skills, experience and knowledge beneficial to DHBs, but robust and transparent processes must allow any private interests to be identified and managed, says Wairarapa DHB chief executive David Meates.

Among the crop of board members nationally are GPs, pharmacists, salaried medical professionals, consultants, directors of service providers, PHO trustees and shareholders of various health companies.

Some DHBs do not currently fully implement their obligations where outside interests are involved, according to the panel that reviewed conflicts of interest at the Hawke's Bay board.

Lead panel member Ian Wilson, chair of MidCentral DHB, sums up conflict-of-interest responsibilities as simple: "If in doubt, disclose, discuss and, unless a statutory waiver is given, do not participate." Board members are obliged by the Public Health and Disabilities Act to disclose any interest they have in a "transaction" of the board. A transaction is any exercise of board duties, any arrangement, agreement, or contract, or any proposal to enter into the same. Interest can arise in early policy setting, the report makes clear.

Liz Falkner is a salaried GP for The Doctors in Masterton and a third-term Wairarapa DHB member. When future palliative care services came up for board discussion, she advised she had an interest; this was a field in which she wished to work. She was not barred from involvement but her interest is now on record.

A register of all members' interests is available at each committee and board meeting and is referred to as an agenda item each time. Interests must be disclosed as they arise, any potential impact debated, and a response decided upon and minuted, Mr Meates says.

A board member may be excluded from all discussions on a certain subject and never be shown the relevant papers.

Where proposals or requests for proposals are under development or contracts up for discussion, all players must be seen to be on a level playing field, Mr Meates says.

Board members were educated on managing conflicts of interest during their induction. They were also apprised of new auditor-general's guidelines arising from the court-challenged Auckland laboratories tender process.

The review panel points out that Hawke's Bay board members - who were later sacked by health minister David Cunliffe - had no training of note and no board governance manual.

The panel's report says Hawke's Bay board member and Healthcare New Zealand managing director Peter Hausmann and the board "failed to act on clear and obvious signs of potential conflict of interest". A contract between the board and Healthcare NZ was ultimately dropped.

Director-general of health Stephen McKernan has staff looking at ways to strengthen induction for boards and "at what more [the Ministry of Health] can do".