Key Points:

Outgoing Labour Party president Mike Williams has resigned as director on three Government-appointed boards after being told he was no longer welcome by the National Government.

State Owned Enterprises Minister Simon Power confirmed Mr Williams had tendered his resignation from Genesis Energy, the New Zealand Transport Agency, and GNS Science.

Mr Power said he had told Crown Company Monitoring Advisory Unit (CCMAU), the agency charged with Crown-owned companies, that he expected Mr Williams to go.

"I told CCMAU the circumstances had changed and I would expect Mr Williams to do the honourable thing."

Mr Williams told Radio New Zealand of the resignations yesterday after he was strongly criticised by Prime Minister John Key for not standing down.

Speaking on Agenda yesterday, Mr Key said he was not aware of Mr Williams resigning, and indicated he faced being sacked if he did not.

He said it was appropriate for any appointees from "political favour" to step down in a change of government.

Labour came under concerted attack from National when National was in Opposition for appointing its favourites to boards.

However, Mr Key would not rule out appointing people with strong National Party links to similar positions. He said it was his preference that appointments to overseas posts and government boards were based on ability, but it was possible some would also have links with the National Party.

"There'll always be people you know because of your association with them and you rate their ability and performance so you can never say never."

He said Mr Williams' appointment was "purely for political favour".

"He isn't appointed because of his commercial ability or commercial nous, he's there because he was a friend of Helen Clark, he was the Labour Party president."

Mr Williams' response that he had already resigned seemed to catch the Government by surprise - Mr Power had to check with CCMAU to clarify. Mr Power told the Herald Mr Williams had sent in his intention to resign, but the formalities and effective dates of the resignations were not yet finalised. He said he had spoken to CCMAU early last week and they then contacted Mr Williams.

He said letters of appointment to Crown boards and SOEs made it clear the shareholding minister could remove a director at any time if it was deemed in the interests of the shareholder.

It is yet another piece of fallout for Mr Williams in the wake of Labour's election defeat - he also formally resigned as president of the party at the party's ruling council meeting on Saturday, effective from March. Engineering, Printing and Manufacturing Union national secretary Andrew Little has put his hand up to replace Mr Williams, and has Mr Williams' support, but nominations will remain open until February.

Mr Williams earned $60,400 in director fees from Genesis Energy last year and $23,000 from GNS Science. As a director for the NZ Transport Agency's predecessor, Transit NZ, he received $25,000.