Ethics, leadership and Elder statesmen

MIKE O'DONNELL
Last updated 05:00 16/03/2013
sierra o'donnell
Sierra O'Donnell at the Wild Food Festival.

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OPINION: One of the delights of the annual New Zealand Wild Foods Festival in Hokitika is the process of getting there.

It's the sort of heartland experience that demands a road trip, preferably as indirect as possible, and in as old a car as possible.

There's also the sentient pleasures of familiarity: the arid alpine air at the top of the Wairau Valley, the moist humidity of the Buller Gorge and the sinful smell of coal fires in Greymouth's chill night air.

Coal has been one of the mainstays of the Coast economy over the last century while a lot of other businesses have come and gone. And a big part of the coal industry has been the state owned enterprise, Solid Energy. Formed out of the old State Coal Mines Department then massaged into Coal Corporation in 1987, the company was branded Solid Energy in 1996.

Although headquartered in Christchurch, Solid Energy's heart seems to be in Greymouth and walking around town it's clear it has made good on its SOE charter of delivering social benefits. Its brand appears on everything from the local aquatic centre, to the rescue helicopter flying overhead and the nearby Denniston Development Project.

But ask any local what they think of Solid Energy, and the response is corrosive. Not one person I spoke to - from publican to mechanic to café owner - had a positive word to say about the company.

It was bad enough last year when they cut one in four jobs and closed Spring Creek mine. But the revelations of the last few weeks - that the company may implode after taking on too much debt while ex-CEO Don Elder still enjoys his full salary - have made Solid Energy a cuss word in the local community.

What really seems to stick in their craw is that, even though he's a prime instigator of the strategy that led them to ruin, Elder continues to be paid his heady salary of $1.3 million.

To any normal person the idea of continuing to pay a former leader a million dollar salary after he has led the company to the edges of insolvency, beggars belief. Worse is Chairman Mark Ford's justification that his decision to continue to pay Elder $600 plus an hour is because Ford needs access to Elder's institutional memory.

You would think that if a manager had sucked on the teat of a total $10 million or so in salary over the past 12 years, then the honourable thing to do would be remaining accessible for a couple of months afterwards to help the new guy or gal get their feet under the desk. That the chairman has decided to morph this simple ethical responsibility into a $600 plus per hour commercial arrangement is just bizarre.

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I also reckon it's the sort of act that defines old world businesses, getting trapped into paying too much for too little, with little accountability or transparency. And it's seriously out of whack with the new accountability of web businesses and the scrutiny of social media.

When Steve Jobs came back to rescue Apple after this sojourn at Pixar he requested an annual salary of $1 in his role as interim CEO. To him it was a matter of honour and doing the right thing.

Consider the head of eCommerce empire Zappos, Tony Hsieh, who has an annual salary of just $36,000. In Hsieh's case (as with Jobs at the time) the remainder of the remuneration package is made up of share options should the company do well against budget. For him to do well, every shareholder must do well.

But perhaps the keenest example of the new accountability happened the same time Solid Energy's directors were fronting up to the Select Committee in Wellington.

Across the other side of the globe the world's largest group buying business, Groupon, had just posted disappointing results. The next day Groupon CEO Andrew Mason stepped down.

Rather than trying to hide from culpability, Mason wrote to every employee and told them in brutal terms that he had been fired by the board for not delivering. Listing his failure to deliver earnings, irregularities in his exchange filings and a drop in share price, Mason admitted that he was accountable.

Better than that he did it with humour as evidenced in this excerpt:

"After four wonderful years as CEO of Groupon, I've decided that I'd like to spend more time with my family. Just kidding - I was fired today. If you're wondering why, you haven't been paying attention. You deserve the outside world to give you a second chance. I'm getting in the way of that. A fresh CEO earns you that chance."

Such scrupulousness is as disarming as it is refreshing. It's also a million miles from what we've seen at Solid Energy.

The costumes Coasters wear to the Wild Foods Festival are rich in up-to-the-minute satire. This year unemployed Popes were a popular choice. I'm guessing next year we're likely to see a bevy of Don Elders, walking around with wheelbarrows to carry all their state owned enterprise payouts.

Mike "MOD" O'Donnell is a professional director and eCommerce manager. This year he judged the commercial section of the Wild Foods Festival and awarded the #1 prize to the Curly Tree Whitebait Company from Haast.

- BusinessDay.co.nz

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