Directors require skills, not a high profile
As tens of thousands of investors line up to become share owners with the Mighty River Power listing, assessing companies' boards of directors is likely to become a popular pastime.
But do popular - or at least high-profile - directors on company boards give an assurance to investors that their companies will be well-managed? And how exactly should retail investors assess corporate governance?
John Hawkins, chairman of the Shareholder's Association, is blunt when asked if a director's public profile has any bearing on their competence as a director: "Absolutely not," he said.
Ralph Chivers, the chief executive of the Institute of Directors, is a touch more diplomatic when discussing the well-known who take a seat at the boardroom table.
"Ultimately it isn't the person's profile, but it's the competence and skills they bring to the table that's fundamentally important in terms of the value they add to the company," he said.
Directors with competence in fields other than business have had a mixed record.
Dame Jenny Shipley's role as chairwoman of Genesis Energy has come under the spotlight since the collapse of Mainzeal, the construction company on which she also served as chairwoman. Genesis is preparing to list as part of the Government's mixed ownership model partial privatisation.
When questioned over the Mainzeal collapse last week, the former prime minister told the commerce select committee she took her directorships seriously.
"I can assure the member that in all of my roles, both current and former, I have sought to work in the best interests of the company," Shipley said.
Add to this former justice minister Sir Douglas Graham's role as chairman of collapsed finance company Lombard Finance, and recently deceased former rugby boss Jock Hobbs' helmsmanship of failed Strategic Finance, and the question of the value profile adds to a board comes into sharp relief.
Graham, who was convicted of Securities Act breaches and sentenced to 300 hours of community service over his directorship of Lombard, is appealing both his conviction and sentence.
Chivers, unwilling to comment on individuals, said companies went out of their way to recruit well-known individuals to serve on their boards.
"Profile is often sought for, and that's not necessarily for bad reasons if it's linked to demonstrated competence," he said.
Chivers said individuals who cut their teeth in non-business fields could contribute to a successful board, but they needed to be part of a team that had commercial experience and investors needed to assess the board as a whole.
Business failure did not always signify poor governance, Chivers said. "The public discourse around company failure often doesn't properly separate out the failure of the company and the decisions and actions of individuals within it.
"Business is about taking risks. Sometimes they pay off and sometimes they don't," he said.
Hawkins, speaking broadly of politicians who see out their retirement years as directors, said their skill sets often aren't up to the task.
"Someone who went from school to university to political activist to member of parliament probably doesn't have the range of skills that most commercial operations would be looking for," he said.
Of course there are exceptions, and Hawkins pointed to Simon Power, the former justice minister who quit politics to head up and become a director of NZX.
Hawkins said Power's political background crafting financial regulation made his appointment a sensible one.
Both Chivers and Hawkins agreed recent prosecutions of directors had helped focus minds around boardroom tables and lifted standards of corporate governance in New Zealand.
"Recent history has helped give people who were too comfortable in their roles a bit of a wake-up call," Chivers said.
Hawkins said this was particularly true of politician appointments. Board positions on SOEs were no longer seen as a retirement home for old politicians.
"I think there's a recognition in political circles that these kinds of jobs for the retiring troops simply don't work out," he said.
"The days of old, male, pale and stale have gone."
Sir Douglas Graham
Claim to fame: Justice minister
Directorships past and present: Lombard Finance (collapsed), New Zealand Superannuation Fund.
Dame Jenny Shipley
Claim to fame: Prime minister
Directorships past and present: Mainzeal (receivership and liquidation), Genesis Energy, Momentum Consulting.
Claim to fame: Former All Black and NZRU boss
Directorships past: Strategic Finance (collapsed)
Claim to fame: Rugby World Cup-winning All Black captain
Directorships past and present: Fairfax Media, Hoyts Group, Forsyth Barr
Claim to fame: Justice minister
Directorships past and present: Westpac's Private Bank, NZX
- © Fairfax NZ News
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