Magazine of the Institute of Directors in New Zealand

OCTOBER/NOVEMBER 2014 OCTOBER/NOVEMBER boardroom

SOLE SURVIVOR Kathryn Wilson and the building of a brand DIVERSITY: NEW ZEALAND FALLS BEHIND ON THE CHARTERED MEMBERSHIP PATHWAY

27 Wanted – independent 36 Why bonds attract 38 Ageing gracefully – 40 Is raising capital ever just 44 Spreading the net with directors for governance investment coping with the rising another day at the office? board appointments roles cost of healthcare We’d like to get our thinking into your boardroom. Growing your brands in a systematic and disciplined way will drive up margin, improve your bottom line and boost your reputation. As a design-led advertising agency, we turn sound business thinking into rich creative concepts and powerfully designed campaigns. Our work is crafted and effective. If your board is looking for a practical, results focused growth partner, request your copy of strategy thinking™ at strategy.co.nz.

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www.strategy.co.nz AUCKLAND | WELLINGTON | CHRISTCHURCH | SYDNEY We’d like to get our thinking into your boardroom. Growing your brands in a systematic and disciplined way will drive up margin, improve your bottom line and boost your reputation. As a design-led advertising agency, we turn sound business thinking into rich creative concepts and powerfully designed campaigns. Our work is crafted and effective. If your board is looking for a practical, results focused growth partner, request your copy of strategy thinking™ at strategy.co.nz.

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Ad_BV_Boardroom_NZ_0814_FINAL.indd 1 7/31/14 9:20 AM BOARDROOM | 5 FROM THE EDITOR 12 Heart and sole Seeing opportunity where others saw difficulty allowed Kathryn Wilson to spot a gap in the market and fill it with a fast-growing brand of fashion footwear 10 First steps on the Chartered Membership pathway 12 Heart and sole There’s good news and bad news 15 Diversity: missing the beat in this issue. The good being 18 Inside Mentoring that energetic entrepreneurs for Diversity like Kathryn Wilson seem to 20 Ethnic diversity – business flourish here – even against needs to catch up tough odds. The not-so-good 22 Room to move news is that when it comes 24 In distinguished company to embracing board diversity, 28 Baking and the New Zealand is well behind. corporate food chain 30 Playing the long game This matters – not because 34 Is mass media marketing diversity is important for its really on the way out? own sake – but for fundamental 36 Why corporate bonds economic reasons. Research has are more popular here found that organisations led by than in Australia boards where there is diversity of 38 A golden age? thought, background, gender and 40 Raising capital – just age are more capable. Diverse another day at the office? boards are more open to ideas, more aware of the international INSIDE IoD and domestic market’s demands, 7  CEO Report shareholders’ expectations 8 Update and staff’s concerns. They are 42  Director Development more likely to come up with 44  Board Services original and effective solutions. 46  Branch News Homogeneity masquerades 48 Branch Events as efficiency and cohesion but ultimately it is less effective.

Katherine Robinson Editor, boardroom

Institute of Directors in New Zealand (Inc) Mezzanine Floor, 50 Customhouse Quay 15 Diversity: missing PO Box 25253, Wellington 6146 30 Playing the long New Zealand the beat tel: 04 499 0076 We were the first country to game fax: 04 499 9488 give women the vote, yet in Should business be worried email: [email protected] board appointments for women, about a National-led www.iod.org.nz it’s been slow progress government in its third term? 6 | BOARDROOM

Institute of Directors (IoD) boardroom is published six times SENIOR MANAGEMENT TEAM COUNCIL 2013/2014 a year by the Institute of Directors Chief Executive Officer Stuart McLauchlan, President; in New Zealand (IoD) and is free Dr William Whittaker Michael Stiassny, Vice President; to all members. Subscription for Liz Coutts, Auckland; Warren Dalzell, Manager, Membership, non-members is $155 per year. Auckland; Glenn Snelgrove, Bay of Plenty; Marketing and Communications Margaret Devlin, Waikato; Jim Donovan, boardroom is designed to Nikki Franklin inform and stimulate discussion Wellington; Dr Helen Anderson, Manager, Governance Leadership Centre in the director community Wellington; John McCliskie, Nelson Simon Arcus but opinions expressed in this Marlborough; Ray Polson, Canterbury; Geoff Thomas, Otago Southland magazine do not reflect IoD Corporate Services Manager policy unless explicitly stated. Chris Fox COMMERCIAL BOARD For all editorial enquiries: General Manager Commercial Ray Polson, Chairman, Stuart McLauchlan, Editor, Katherine Robinson Tim Allen Dr Alison Harrison, Rangimarie Hunia 027 5639 686 or email [email protected] Registrar Dr Lisa Docherty For all advertising enquiries: Fran Page: 04 801 0450 The Institute of Directors has staff based at the National Office in Wellington, and eight branch managers operating from their localities. For National Office, telephone boardroom is designed by 04 499 0076. For branch managers’ contact details see Branch Events, page 49 Strategy Design & Advertising, www.strategy.co.nz boardroom is pleased to acknowledge the support of sponsors Institute of Directors in Marsh, Chapman Tripp and KPMG. New Zealand (Inc) Mezzanine Floor, 50 Customhouse Quay, PO Box 25253, Wellington 6146, chapmantripp.com, 04 499 5999 marsh.co.nz, 0800 627 744 New Zealand Tel: 04 499 0076, Fax: 04 499 9488 Email: [email protected] www.iod.org.nz kpmg.co.nz, 09 367 5800 BOARDROOM | 7

CEO REPORT

Why we really are better together Writing from Canada after attending the latest meeting of the Global Network of Director Institutes (GNDI), IoD CEO Dr William Whittaker examines the power of diversity in harmony

I write this before election day in New It helps small nations in a globalised world The purpose of GNDI, of which New Zealand Zealand. While New Zealanders’ focus to be formally part of a wider political or is a founder and an Executive Committee has naturally been on the election, the economic entity, although Switzerland and member, is collaboration and mutual western world’s attention has been Norway with their populations of around enhancement. It is in its infancy but the caught by the Scottish referendum on 5 million (about the same as Scotland) potential is huge, with the group developing independence with the pre-referendum would suggest there are exceptions. the concept of a global passport, entitling debate and post-referendum tasks all Scotland voted against independence members of one nationally pre-eminent focusing on the applied principles of on Thursday, but it was not a vote for the director association to access benefits from collaboration, partnership and cooperation. status quo. The debate over regional and others within the group, a sort of frequent flyer programme for directors’ institutes. Collaboration is the ability to work with national autonomy has just begun, and others and turn ideas into reality. This it promises a constitutional shake-up In a globalised world companies need quality is especially important when in the United Kingdom. David Cameron to be sharper. The director’s skillset in obstacles emerge. These difficulties now faces a broader debate over the international companies is broader. There are hard to overcome in a team setting centralisation of power in London, are therefore learnings to be gained from without a collaborative spirit. That Britain’s place in Europe, intense budget our colleagues’ experience, be it ‘say pressures, and dissent within his own party translates into shared vision and values. on pay” in Australia, hostile takeovers as he heads toward a general election in Canada or creating equality through In any secession, the following questions campaign next year. Commonsense diversity in South Africa and Sweden. IoD should be asked: can people not speak prevailed but victory will be at a price. their language or practise their religious New Zealand, with one of the highest faiths? Are they discriminated against? Are I attended a concert by the Orchestre member to total national population ratios their human rights abused? Is the economic Symphonique de Montreal. A Russian in the world, is considered a lead violin deck stacked against them, such that their artist of prodigious skill and size – one in the ensemble with our best practice standard of living has declined or not kept reviewer described him as “a large pianist” materials, commitment to diversity pace with progress elsewhere? Is there performed Profoviev’s 2nd Concerto, one through Future Directors, Mentoring such disrespect directed toward them by of the most technically formidable piano for Diversity and upcoming but yet to people elsewhere that collective relations concertos in the standard repertoire. Those be announced diversity initiatives and are uncomfortable, even intolerable? of you who have read Richard leBlanc’s professionalisation programme. Inside the Boardroom will be familiar with The answer to these fundamental questions his analogy of the orchestra. A group of What we are collaboratively working for – the ones on which a breakup should talented musicians could play a passable is a strong currency, encapsulated in the be focused – were all resolutely ‘no’ in version of any scored piece of music. concept of the truly professional director, Scotland’s case. My Canadian host and But a conductor would extract the best a tradable and transferable commodity. colleague Stan Magidson who heads up our from them. Prokoviev’s concerto is a Just as there is nothing cowardly in not sister organisation, said that the Scottish solo supported by a minimalist or spare seizing an opportunity you don’t want, as question was reminiscent of the Quebec- backing. The same reviewer wrote “the suggested by the majority of the Scottish Canada separation issue with the same colossal first cadenza is so long that people in the referendum, it is poor risk power plays and levers. The referendum musicians can leave for a smoke”. But a assessment, judgement and execution prompted fears of breakup, extravagant strong performance should result from if you fail to seize one that promises promises (or bribes) and then the need to each player making a contribution. The a good return. That is the domain of deliver on them. Canada remained united orchestra is harmonious diversity in directors who, when playing, need to but Quebec came out of it stronger. action. The board should be similar. interpret the score and also be in tune. 8 | BOARDROOM

Update

RECENT APPOINTMENTS Changes on

We would like to congratulate the following members on their new board positions. board of IoD Ltd After successfully overseeing the launch Paddy Boyle has been appointed an Jane Freeman has been appointed of IoD Ltd as an operating subsidiary independent director of Jade Software independent director of Kiwi Income company in 2013, directors Jim Donovan, Corporation. Property Trust. Margaret Devlin and Brian Steele have stepped down from the board. Jeremy Smith, already an Orion director, Doug McKay has been appointed an “The IoD would like to offer its thanks has been appointed chair of Orion. independent director of Ryman Healthcare. to these directors who wholeheartedly committed to establishing IoD Ltd and Andre Lovatt has been appointed a director Sir Ralph Norris is to replace Ralph Waters making it the success that it is,” says of Christchurch International Airport. as chair of Fletcher Building. IoD President Stuart McLauchlan.

Ray Polson will remain as chair, but Chartered Fellow Gary Leech will Josette Prince will replace Pumpkin Patch the board is looking for an independent become a director of CityCare after founder Sally Synnott on the organisation’s director to join Stuart McLauchlan, its AGM in October. board. Dr Alison Harrison and Rangimarie Hunia.

Candidates should have a strong Mary-Jane Daly has been appointed to the Chartered Fellow Bruce Richards succeeds commercial background, robust board of Kiwi Income Property Trust. Elaine Gill as TSB chair knowledge of professional development and/or professional advisory services, and the ability to operate effectively in Chartered Fellow Nikki Davies-Colley Chartered Fellow Whaimutu Dewes a complex environment. To apply, visit replaces Warren Moyes as chair of was reappointed to the board of Director Vacancies at iod.org.nz Northpower. Housing New Zealand

Janice Fredric has been appointed director IoD joins forces of NZCU South. with NZIER John Harvey replaces Sir David Gascoigne for survey as chair of New Zealand Opera. We thank those who have taken part in a survey conducted by the IoD’s Governance Leadership Centre (GLC) and the New Zealand Institute of Economic Research IOD BY NUMBERS* (NZIER) earlier this month. The survey aims to take the temperature of the boardroom 6723 25% 12.1% 3532 on high-level business and economic issues. Results will be reported in November. members as at women members of IoD members are in the IoD’s 30 September Chartered Members LinkedIn group 2014

* Correct at time of publication BOARDROOM | 9

IoD welcomes New Health Future Directors new partners and Safety Appointed The IoD recently signed two separate Association Bindi Norwell will be The Warehouse Group MoUs – one with Cooperative Business board’s Future Director appointment for 2015. A new umbrella association for workplace of New Zealand (CBNZ) and another with health and safety professions in New Bindi has over 15 years experience in the Human Resources Institute of New Zealand has been established. The Health strategic management, working both Zealand (HRINZ) – signalling new working and Safety Association of New Zealand here and in Australia and the UK. relationships with both organisations. (HASANZ) was launched on 10 September Also recently announced – NZ Venture “CBNZ is the peak body representing 2014. HASANZ aims to raise professional Investment Fund CEO Franceska Banga cooperatives and the cooperative standards across the occupational health will be on the board of Fisher & Paykel business model in New Zealand and safety sector to provide healthier and Healthcare as a Future Director. and HRINZ is the leading member safer workplaces for New Zealanders. organisation for HR professionals. The year-long programme gives aspiring Recently appointed establishment chair, We’re pleased to be partnering with directors boardroom experience in business consultant and IoD Member each of them to raise awareness of a publicly listed company. Future Shenagh Gleisner says that she is acutely the importance of good governance,” Directors can participate in discussions aware of the need for healthier and says IoD CEO Dr William Whittaker. but are not allowed to cast a vote. safer workplaces in New Zealand. Discussions are underway between CBNZ The Future Directors programme was Shenagh Gleisner’s experience and the IoD as to how both organisations launched through the IoD in April 2013 by Sir includes Deputy Chief Executive of the can work together, particularly regarding Stephen Tindall, IoD Vice President Michael Department of Labour, Director of the the provision of improved governance Stiassny (Vector/Korda Mentha/IoD) and Earthquake Recovery Programme at the development specifically designed to meet Des Hunt (NZ Shareholders Association). Department of Building and Housing, the unique needs of the cooperative sector. and many senior positions in the health sector. She currently chairs the Risk and Assurance Committee for the Department of Prime Minister and Cabinet.

IoD farewells a past president The IoD would like to offer its sympathy to family and friends of Paul Hargreaves, who died on 14 August, aged 75. Paul was President of the IoD from 2007 to 2009, New Zealand and NIWA, of which he was also and was made a Distinguished Fellow in 2009. chief executive between 1994 and 2002.

His wide-ranging career included the His community work included the Laura co-founding of Datacom, then known as Ferguson Trust in Christchurch, Domestic Computer Bureau Ltd, in 1965 as a young Violence Centre, Shine, HiGrowth Project Paul Hargreaves chartered accountant in Christchurch. Trust and the National Council of the New Zealand Automobile Association Datacom is now one of New Zealand’s largest and the Antarctic Heritage Trust. and most successful private IT businesses, with employees and offices spread over Asia Pacific. He was well-liked and well-respected in all areas of his wide-ranging career. In Paul left Datacom in 1989 but remained his eulogy, close friend Michael Horton on the company’s board until 2006, said, “He was a very well-educated person when he was honoured as an Officer of with an enormous ability to engage with the New Zealand Order of Merit. people… he was an elegant fellow who He served on many boards including could talk to anyone. Athough he was 75 those of Radio New Zealand, Antarctica when he died, he had never really retired.” 10 | BOARDROOM

First steps on the Chartered Membership pathway The Chartered Membership pathway is now in place, establishing a new membership structure against which directors and the wider community can benchmark experience and expertise

“The introduction of the Chartered WHAT IS THE FOUNDATION PERIOD? branch events, and making voluntary Membership pathway represents an You will have three years from your first contributions to the development of the historic change, moving us from member renewal after 1 October 2014 to accumulate director profession such as participating organisation to professional body,” says IoD the required 60 points. There is no in mentoring or IoD committees. President Stuart McLauchlan. annual requirement for accumulating WHAT ABOUT PROFESSIONAL points. During the foundation period “This crucial change re-energises the DEVELOPMENT WITH OTHER PROVIDERS? the IoD will not be auditing members. organisation, distinguishing IoD members CPD activity undertaken with other as directors dedicated to continual HOW WILL THE ROLLING THREE- providers attracts the same number of upskilling, currency of knowledge, and YEAR POINTS CYCLE WORK? points as similar activities offered by boardroom best practice.” Following the foundation you will the IoD, provided you can establish that Formed with strong support from IoD be required to maintain 60 points the activity relates to your practice of members and stakeholders, the Chartered over a rolling three-year period. The governance as identified in the IoD New Membership pathway allows members three years cover points accumulated Zealand Director Competency Framework. to move from Associate to Member, the year you are in, plus the points We’ve provided a guide to allocating Chartered Member and Chartered Fellow. accumulated in the two years’ prior. third-party points on our website.

The majority of IoD members – Members, WHAT COUNTS AS CPD? HOW MUCH WILL IT COST TO DO CPD? Chartered Members and Chartered CPD covers the activities, both The cost is dependent on the activities Fellows – will be required to undertake formal and informal, which a director you choose to undertake. It is possible continuing professional development undertakes to improve their skills and to meet the requirement at no cost. competence within the IoD’s New Zealand (CPD). We run a re-cap of some of your HOW WERE CPD POINT Director Competency Framework. most frequently asked questions below: ALLOCATIONS DETERMINED? WHEN DO I START? A wide range of activities counts for The following elements are taken into Members will begin their CPD foundation CPD including: consideration for each activity: period on the date of their first renewal • professional development offered by IoD • time spent or after 1 October. Your renewal date will • professional development by other • currency depend on when you joined the IoD, and organisations providing it relates to • design/formality of learning objectives is one month after your billing date. You improving your governance performance • complexity/depth of learning can find it on your member dashboard • other less formal activities, such • engagement in learning/interactivity when you log in at www.iod.org.nz as reading boardroom, attending • contribution to the profession.

Members 68.8% CHARTERED MEMBERSHIP PATHWAY Associate Members Chartered Members All current members have 11.6% 12.1% now been transitioned into their new categories on the Chartered Membership pathway. BOARDROOM | 11

40 points is the maximum number that may be awarded to any single activity. This ensures that members undertake a variety of CPD activities over their rolling three-year cycle.

WHICH POINTS CAN BE BACKDATED? Points gained by attendance at IoD Director Development courses from 1 January 2014 will be automatically added to your dashboard in the first week of your foundation period.

This applies only to IoD Director Development courses, and does not include branch events or third-party activities.

If you have any queries about your membership contact Lisa McRae at [email protected]. nz. For full FAQs please go to our website www.iod.org.nz/cpd

Recording your CPD activity The dashboard shows your total accumulated points, future bookings and points required to meet the CPD requirement by the end of your foundation period.

Any activity that you have completed through the IoD will be automatically logged with CPD points allocated, but you will need to add courses from external providers as well as informal CPD. When you login, you will see the heading ‘My Dashboard’ under your name in the top right-hand corner

Chartered Fellows Distinguished Retired Fellows Retired 4.3% Fellows 0.8% 1.4% 0.9% 12 | BOARDROOM

Heart

Kathryn Wilson andmay describe herself as “the girlsole who loves shoes but who accidentally became a business” but that’s only part of the picture. Design talent and commercial savvy have made her brand one of the fastest-growing in New Zealand fashion. By Katherine Robinson

As an 18-year-old design student, Kathryn Wilson “That was a real eye-opener in terms of the asked shoe industry experts for advice on how scale of the industry over there,” she says. she could start her own shoe manufacturing She returned home to win an AMP scholarship business. She was told that ­the local market that funded making her first sample shoes. was awash with imports and that all footwear However, her first foray into fashion was not manufacturing was moving offshore. “Find in footwear. On graduating, she was offered a another career” was their best advice. role with knitwear designer Caroline Sills. “I think being told that I couldn’t do it and that it “Knowing that I was passionate about footwear, was such a hard industry to get into just made me want to do it all the more,” says Kathryn. Caroline and Lloyd Sills suggested that I “I could see there was a gap in the market and stay and design knitwear for them, and they I wanted to fill it before anybody else.” would also back me to produce a line of shoes that would test the market,” she says. Sixteen years later and a winner of the Sir Peter Blake Leadership Award, she produces two It was a clever move. Kathryn had the chance collections a year under two labels – a limited to develop her footwear range and learn the edition Kathryn Wilson line and the more business while in fulltime employment. This commercial Miss Wilson. Her shoes are handmade arrangement lasted until 2010 when, with her in seven countries, and she sells around 12,000 shoes stocked by over 50 stores nationwide, pairs of shoes every year online and through retail Kathryn wanted go out on her own. The Sills then outlets in New Zealand, Australia and Hong Kong. became her business partners. Over the last three years, she has opened two stores “I was able to do a Fashion Week show for the in Auckland and launched a mobile pop-up store. first time and we made the front page of The Building the brand and the business has been a New Zealand Herald the next day. I realised long campaign rather than an overnight success. how far things could go in terms of making the brand a household name,” she says. A Bachelor of Design at Massey University followed a year-long Certificate in Fashion More milestones followed in her head-spinningly Design at AUT. In her second year at Massey, hectic schedule – a Kathryn Wilson store opened in she won a scholarship to study footwear at Britomart, followed by another in Herne Bay. There Nottingham Trent University in the UK. is another timed to open in Auckland later this year.

Photography Tobias Kraus BOARDROOM | 13 14 | BOARDROOM

“The Britomart store is a shop-sized “All the shoes are handmade, wherever shoebox, and it was gift-wrapped for the they are. Manufacturing offshore is “Having the board means opening. I’m still not sure why I timed it to nothing to do with the price; it is to that you go into big open the day after our Fashion Week show, do with the quality of finishing that we but I was at Fashion Week till 4am in the can obtain for the customer. Also it decisions knowing that morning, and then at the store at dawn, spreads the risk as we have different they have done a lot of mopping floors for the opening,” she says. delivery dates from each country.” research on your behalf. In a world of online sales, Kathryn Having only ever known shoe manufacture believes that there is still an as an offshore process, she takes long- And if I can prove to them important place for stores. distance management in her stride. “There’s that it is a good idea, then always Skype, emails and phone calls.” “A shop is a billboard for the brand in it probably is a good idea” terms of customer service, the full range Which is not to say that things always go of colourways, even the kind of music smoothly. When asked if there are ever any we have playing. We can present the speed bumps, she laughs and says, “Daily”. One of them is the CFO of Briscoes and is collection as we see it – rather than obviously very financially-minded. He wants One of the rockiest involved a shipment as other retailers see it,’ she says. to know not only the annual budget but also of 3000 shoes that was blocked by the forecast ahead for five to ten years.” It also means that she has a good grasp of New Zealand Customs, who suspected who her customers are and what they want. contamination. Also on the board are an IP trademark lawyer and an e-commerce strategist. “When I started, I was really designing for “I was upset but you can’t get too “He looks at things from a big picture myself and thought my customers had grown wound up about things. It helps point of view, identifying who we up with me, but the reality is quite different.” to have calm, experienced people are talking to and whether we are around who say, ‘everything will work Customers range from 18 to 65 years old, addressing them appropriately. out, there is always a solution’. with most of the demand coming from the “We have another financial mind on middle to upper end of that demographic. “We had to remake the order in about the board who looks at the brand very ten days and air freight everything into “In Britomart, our customer is likely to be strategically and considers where to the country to get it to retailers on time. a corporate working woman in her early take the brand and how to get there. Insurance covered the $30,000 loss 40s who needs to look smart but still feel but there was a delay and a shortfall.” “Having the board means that you go into individual. In Herne Bay, our customers big decisions knowing that they have done will be in gym gear or walking the dog. We TAKING ON ADVICE a lot of research on your behalf. And if I think about real people when we design Kathryn is quick to acknowledge that she can prove to them that it is a good idea, shoes. We’ll say, ‘Would my Mum wear cannot do everything in the business. then it probably is a good idea – one that this? Would a schoolteacher wear this?” She is fearless about asking questions has been well thought out and planned.” This approach has clearly worked, as her and open to enlisting expert help when At the moment future plans for the shoes are distinctive but not alienating. it’s needed. Establishing an advisory business are pending, with the arrival What does she think is more important – a board was part of this strategy. of her first baby later this year. creative design or a product that sells? “My wake-up call was last year. I had “In that context, I have been thinking “Both. You have to have the ideas and so many ideas but not enough strategy what I want out of the business and what the talent to start with, but at the end of to work out which were the right ones my goals are about being involved long- the day the biggest part of the package to pick up. I realised that I was making term. As long as I am creatively involved is being commercial and turning your decisions based on gut instinct,” she says. somehow, I will continue to drive the product into something your customer An Icehouse course and advice from business. I think there are very exciting wants. It’s all very well to have a good fashion guru Karen Walker led to the opportunities offshore and there may style but it means nothing if you don’t establishment of an advisory board. be opportunities for diversification – understand the commercial realities of just as long as we still make it fun.” what people want to buy. After 11 years “I’m definitely the eternal optimist and in the business, we are trying to provide very enthusiastic, so the board’s job TAKING GOOD ADVICE for a customer that we have made a is to bring me back down to reality,’ Support and guidance from an advisory promise to. It’s all about the loyalty that she says. “Though I do sometimes board can accelerate growth, improve you get from the repeat customer.” joke ‘don’t take all the fun out of it!’” financial performance, manage risk or The board is made up of four directors enhance operational performance. MANUFACTURING LONG DISTANCE who bring a mix of complementary skills. Kathryn Wilson shoes are currently For more details on how an advisory made in Spain, Italy, Portugal, China, “They are very different people and we board can enhance your business, see the Romania, Brazil and Indonesia. meet four times a year in a casual forum. Advisory Board Toolkit on www.iod.org.nz BOARDROOM | 15 Diversity: missing the beat As the global demand for talent intensifies and technology reshapes the business landscape, it is critical that we attract, retain and develop both the best and the most diverse talent in senior management and on our boards. But what progress have we made towards achieving this goal? Governance Leadership Centre Executive Felicity Caird finds that New Zealand is lagging behind

Diversity of thought and experience helps and culture, the focus of board diversity In the 2009 report, Women on Boards: ensure a broader range of perspectives, has so far mainly been on gender. why women on company boards are good opens us to greater possibilities, and for business, Prime Minister John Key A large body1 of evidence-based increases the potential for greater asked whether New Zealand companies international research and financial success. Board diversity is not an end were making the best use of the talent on analysis backs the case for better company in itself but a means to improve board offer given the small number of women in performance through diversity. Many effectiveness and company performance. the boardrooms of our top businesses. researchers have found that companies While diversity encompasses a with women on their boards substantially That was five years ago. What has wide range of dimensions including outperform those that do not. happened since then? ethnicity, age, nationality, disability

Judywie / photocase.com 16 | BOARDROOM FIGURES5 REPORTED IN GENDER DIVERSITY ON BOARDS

Norway 40.9% Sweden 27.0% Finland 26.8% United Kingdom 19.0% France 18.3% USA 17.0% EU 16.6% Australia 16.6% Germany 14.1% Canada 13.1% TIPS TO ADDRESS Indonesia 11.6% UNCONSCIOUS BIAS Thailand 9.7% Hong Kong 9.4% • First, acknowledge that New Zealand 9.1% unconscious bias exists China 9.0% Malaysia 8.7% • Create an inclusive board culture Singapore 7.9% that values diversity of thought and India 5.8% facilitates full participation of all South Korea 2.4% members Japan 2.0% • Develop and implement board diversity polices, which include MAKING SLOW PROGRESS measurable diversity objectives Although we know that there are women on sample size of 27,000 directors and 3,000 focused on the appointment the boards of private companies and not-for- companies from more than 40 countries) process profits in New Zealand, research on board to 9.1 per cent reported by Korn Ferry.4 The appointments in these sectors has been latter figure (which is closest to our NZX • Consider the value of diversity limited. We do know about the public sector, reporting) is also used in the Singaporean and how it is reflected in the where women make up 41 per cent of board report illustrated above. This compares composition of your board. members. The government set a target of 45 the number of women on listed companies Diversity should be seen as a per cent women on state sector boards by across 20 countries from a range of sources. question about the whole-of-board 2014, and the percentage has drifted around New Zealand trails the UK, US and Australia. make up 40 to 42 per cent for the past ten years. Irrespective of the different sample • Look broadly at the whole board groups and the variations in reported and its needs rather than individual On the boards of our NZX-listed companies, levels of women on boards, it is clear appointments figures for the 39 companies that reported in the second quarter of 2014 show that 11 that progress in increasing the number of • Develop succession plans that per cent of directors are women. However, women participating on company boards identify the balance of experience the NZX has said that new listings will boost has been very slow and internationally and skills you will need over representation, as 20 of the 113 directors we are lagging rather than leading. the next two to three years that 2 of 19 newly listed companies are women. In 2012, the Human Rights Commission strengthens board diversity and Interestingly, there are nine women predicted New Zealand would not achieve maximises board effectiveness directors on the government’s three mixed- balanced boards until 2046. A number • Ensure there is an objective ownership companies – Mighty River Power, of recent initiatives, such as mentoring 3 competency and merit-based Genesis Energy and Meridian Energy. This programmes, targets championed by appointment process would seem to indicate that a lift in overall business leaders and politicians, and NZX figures could be due to Crown appointments. disclosure and reporting have seen some • Give appropriate weight to success, but it is a slow pace of change. intrinsic competencies and Latest figures for 2014 show that in capabilities, rather than over- Australia 18.3 per cent of ASX 200 company Some might argue that we need more valuing certain kinds of experience. directors are women (reported by the AICD) rules or quotas. The IoD takes the Be aware that not all candidates and in the UK 20.7 per cent of FTSE 100 view that quotas are not the answer, are ‘confidence equals’ and directors are women (reported in the annual not least because of the potential for look for the hidden value. Lord Davies Women on Boards reports). undermining merit-based appointments, resulting in less effective boards. There is plenty of research on board composition and gender diversity but I want Rather than quotas, the IoD supports to stress that figures do vary depending existing initiatives such as mentoring and on the metrics and samples used. Reports talent development. We also need to keep published in 2014 range from the Credit measuring and reporting. But if we want Suisse figure for New Zealand of 19.6 more than continued incremental progress, per cent of women directors (from its then we need to think more holistically. BOARDROOM | 17

INCLUSION AND DIVERSITY UNCONSCIOUS BIAS We use biases every day to make decisions There is a growing school of thought and Unconscious bias can contribute to and survive, for example, what bread research, including by Tomorrow’s Company, poor decision-making in the workplace, to buy or how to travel to work. It is our McKinsey & Co. and Deloitte, that the lack particularly regarding recruitment awareness of biases that is important. of diversity is due to an inherent dominant and performance management. A lack of board diversity can indicate culture of many organisations. That to achieve To give an example of how to fix this unconscious bias influencing decision- greater diversity and its benefits, we need to phenomenon: in the late 1970s the top five making about board appointments. This focus on creating a merit-based culture that orchestras in the USA had fewer than 5 per could mean the composition of the supports inclusion and diversity. Think of it cent women players. Blind auditions were board may not actually be based on as diversity being the mix (the combination of introduced – with the players behind screens what the company needs and therefore people, skills and experience) and inclusion in the early rounds – now women make up over not as effective as it could be. as being a way to make the mix work. 30 per cent of players. Our own New Zealand The challenge is to overcome our biases, It’s not about fixing women, men or Symphony Orchestra follows this practice. both conscious and unconscious. If organisations but rather, fundamentally Unconscious bias is the product of we harness all our talent through changing the way things are done unconscious knowledge (what we know) inclusion and diversity then our to truly recognise merit and achieve and unconscious thinking processes (how competitive edge will follow. diversity. This includes recognising and we think), and can happen automatically addressing biases, assumptions and or quickly (fast thinking). This may GOVERNANCE LEADERSHIP CENTRE language that feed the existing culture. seem more efficient, but if relevant The newly launched GLC aims to foster The Korn Ferry Institute recently wrote, information isn’t considered, then discussion through articles such as “Mono-dimensional boards, ill-equipped decision-making — for example, on this one. For more articles, resources, to respond to the complex issues shaped appointments — may not be optimal. directorsbriefs on topical issues and IoD by a fast and ever-changing market, might submissions on current legislation, visit Bias can come in different forms, such increase risk, not value, for shareholders.”6 Governance resources on www.iod.org.nz as stereotypes, or the tendency to One of the ways to create an inclusive and gravitate towards those who are similar diverse culture is to address unconscious bias. to us and to favour those who we like.

1 For more information see the resources at www.iod.org.nz 4 Korn Ferry Institute, The Diversity Scorecard 2013: 6 Korn Ferry Institute, Beyond ‘if not, why not’, the pathway 2 National Business Review, Director gender balance Measuring Board Composition in Asia Pacific, page 14. to directorship for women in leadership, (2014) page 3. ‘disappoints’ but recent IPOs to boost figures, 22 August 2014. 5 Gender diversity on boards: a business imperative, April 3 Sourced from board members listed on Treasury 2014, Report of the Diversity Task Force regarding website on 26/8/14. http://www.treasury.govt. Women on Boards (DTF) Singapore, page 14. nz/commercial/portfolio-entities/a-z/

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Call us to discuss on 04 499 0076 or email [email protected] iod.org.nz IOD14004/1 18 | BOARDROOM Inside Mentoring for Diversity Since its launch in 2011, the IoD’s Mentoring for Diversity programme has been a conduit for board-ready women directors to be mentored by chairs and senior directors of NZX-listed and large company boards. Just under 80 women have been mentees on the programme, achieving many board appointments. But according to the mentees and mentors, the programme has wider benefits. By Katherine Robinson

“Confidence is certainly the number one They planned their first session so they could thing I have gained,” says 2014 mentee get to know each other’s background and GETTING THE MOST OUT Clare Morgan, New Zealand Country their respective journeys into governance. OF MENTORING Manager, Wrigley. She already has a couple Mentees had these pointers “We discussed different board types, and of independent director roles under her belt for future mentees: the importance of a balanced portfolio but says that it has been reassuring to know • be open to looking at yourself of governance roles,” says Dianne. “My that her sales and marketing skills would differently mentor has been very supportive and be valued within a larger board setting. • be clear on why you are doing it and encouraging, very approachable, and I have share this with your mentor The IoD offered guidelines as to how really enjoyed my time working with him.” • do your own thinking about what the mentoring sessions could run but Fiona Oliver, who has governance you need to cover and what determining the content and structure could experience in the public sector, felt questions you need answering be tailored to suit each mentor and mentee. that she gained in “knowledge, • to get the most out of the sessions – Clare and her mentor catch up every personal awareness and a strong prepare in advance two months at a café for over an hour’s governance community network.” • widen your network by asking for a discussion. It is deliberately informal but at mentor outside your usual network the end of each session, Clare has specific “Each session had a subject matter and a • be prepared to attend all the things to work on over the next two months. desired objective. This encouraged both functions during the year, and push of us to think about the session before yourself out of your comfort zone to “Having to get things done by each it was held. For me, it also ensured that meet new people and build a new meeting has been a good motivator,” I knew which questions I wanted to ask network, including other mentees. she says. “Initially, it was more around and I left the session with clarity on the developing a good governance CV, but at next steps I needed to take ” says Fiona. Mentors’ tips for future mentors: the latest meeting the focus shifted to • how you structure the programme how to develop networks and contacts.” She felt that only those who are already will depend on your mentee – some committed to becoming a director should prefer a very structured programme 2014 mentee Jackie Lloyd has a solid undertake the programme. “I personally while others do not grounding in public and private sector think that time in sessions should be spent • allow for feedback so ideas and governance. building on that desire rather than using suggestions can be revisited “I know many experienced directors, the sessions to make a decision,” she says. • keep an open mind but I have found it useful to have • it is the mentor’s role to someone outside my usual network as THE MENTORS’ PERSPECTIVE constructively challenge the a mentor. They have helped me to see Mentors such as 25 Percent Group founder mentee but tailor your challenges myself and what I can offer a board and Mighty River Power chair, Joan to the individual from a totally different perspective.” Withers, gave their time freely. Joan says • enjoy the experience – if you do, that she decided to become a mentor your mentee will get more benefit Dianne McAteer also has governance because she saw it as a practical way experience, including chairing the board to share her experiences with someone of Netball Northern Zone. She says that who had high potential in governance. she has gained “wisdom from a very experienced chair and director, and “Also from time to time I have been introductions to his networks. It has been critical of some IoD initiatives so it was very helpful to have his support working a chance to do something constructive, through some challenging situations.” rather than just throwing rocks. BOARDROOM | 19

“For me it has been great having a relationship also keeps me aware of who is out there CHANGES FOR 2015 with someone who makes me feel that I am with an aspiration to be a director.” Next year, the programme will be providing value. The whole point is to provide redesigned to promote board diversity He finds the mentor role rewarding and has assistance and value to the mentee so the in a wider sense. As well as gender, the made it clear to his mentees that for him acid test is how they feel about the initiative. next intake will be considered in terms of this is not just a one-year commitment. ethnicity, age, skillset and background. “I was also fortunate in that I like my John sees part of his role as questioning mentee. I would imagine that if there were “We are proud of what has already the mentees on why they want to become incompatibility issues that could dilute or been achieved through the programme directors. “Most governance roles are poorly erode the value of the exercise. Matching by both mentors and mentees, paid, in some cases it would be better to stay mentors to mentees is important.” but feel that it is time to build on in a fulltime executive role and build towards the programme’s success,” says Air New Zealand chair Tony Carter sees it as a a board appointment over a five-year period. way to give something back. “A lot of people IoD Membership, Marketing and were helpful to me when I commenced my “The thing we have to watch is that Communications Manager Nikki Franklin. people don’t expect to immediately governance career so I felt it appropriate Nikki has been Mentoring for Diversity get an appointment,” he says. to give back some of my learnings. Also project director since its launch in 2011. I genuinely believe diversity is important Joan Withers makes the point that “The programme will continue to target in improving governance, and this was an improving the gender balance on boards top performers but from a broader opportunity to contribute in a positive way.” requires focus on both supply and demand. cross-section of governance career He felt that he has learned as much from “There are now a number of schemes levels. We will still be looking for his mentee as she has from him. In his designed to increase the pipeline of board- applicants who have the potential to role as a mentor he felt that the most ready women. We need to make sure that be appointed to the board of a large important thing was “to give someone a boards are aware of the compelling case commercial company,” she says. sounding board to develop ideas in a very for diversity and are actively reviewing their supportive and confidential environment.” Applications will open in March, composition to make sure they have the with mentoring beginning in June. Giving back also motivated BNZ chair, skills, experience and diversity of thought John Waller to volunteer but he adds, “It required to thrive in today’s environment.”

MENTORING FOR DIVERSITY SURVEY The IoD took stock of progress in the Mentoring for Diversity programme with a survey of mentors and mentees. These represent a sample of some of the results. Findings shown here are based on responses from half of the 2012 mentees and 78 per cent of 2013 mentees TO WHAT EXTENT HAS THE MENTORING HAVE YOU GAINED ANY BOARD PROGRAMME HELPED YOU DEVELOP POSITIONS SINCE YOU STARTED ON YOUR GOVERNANCE CAREER? THE MENTORING PROGRAMME? Not helped at all Not helped much Helped a lot YES Helped a little NO

HAVE YOU 43 POSITIONS GAINED BEEN ACTIVELY These figures are from the 34 mentees who completed the survey. These positions include the following 22 on the boards of large SEEKING BOARD organisations: POSITIONS? NO 18% 2 14 5 1 YES 82% Listed Large private SOE Other company company organisations of substance 20 | BOARDROOM

Ethnic diversity – business needs to catch up As the New Zealand population becomes more multi-cultural, the question has to be asked: is ethnic diversity reaching the upper echelons of business leadership? Amy Williams reports

In Auckland, Wang topped the 2013 Census Asian directors on their boards, and list of the city’s most common surnames, SKYCITY Entertainment Group is waiting for “An organisation that followed by Li, Chen and Liu. Smith, still regulatory approval to appoint Melbourne wants to improve itself the country’s number one surname, came and Hong Kong-based consultant Richard in fifth in our largest commercial centre. Tsiang as a director. When the company should learn something, The census also revealed that almost one announced his appointment, SKYCITY but when you outsource out of eight New Zealand residents are acknowledged that given his ethnicity, Asian. New Zealand is rapidly becoming he would bring valuable insights into its the problem all the time, more multicultural, but is business prime client base to the boardroom. you’re learning nothing” keeping up with the pace of change? Generally though, ethnically diverse Not according to Director of Ethnic appointments are not happening at the products’. We have to be more sensitive Affairs, Berlinda Chin, who says same pace as our changing population. to the way they go about doing business.” business is not as ethnically diverse as the population, and needs to catch LOOKING EAST FOR EXPORTS Patrick English, the director of the up in order to enter new markets and As the chair in Business in Asia at New Zealand China Council, agrees. meet the needs of local customers. Victoria University, Professor Siah Hwee He spent more than a decade living Ang has a particular interest in ethnic and working in China, including Figures for multiculturalism in the diversity in business. He says New time as a trade commissioner and boardroom are hard to come by, but the Zealand boardrooms still trail behind diplomat, before joining the council. few available show a lag in ethnic diversity in ethnic diversity yet paradoxically, at top management and boardroom Patrick says that when he first started in businesses are looking east to grow. levels. The Office of Ethnic Affairs, for the role, raising the issue of diversity was instance, can identify a slight decline in The magnitude of China and India met with blank looks, but it’s now beginning estimates of ministerial appointees of makes them very attractive markets, to be part of the business conversation. ethnically diverse backgrounds from 1.4 and Professor Ang says companies He says there is a Chinese saying that refers per cent in 2010 to 1.3 per cent in 2012. without local knowledge of the business to one bed and two dreams, and that can culture and experience in those Berlinda says New Zealand workplaces apply to a board that is not representative markets are at a clear disadvantage. have been slow to ride the wave of ethnic of the markets it’s operating in. diversity, but that people are more open The common export model of hiring a “Having people visit three times a year is to having a conversation on this subject salesman on the ground rather than not going to wash. Just having locals is also now than they were five or ten years ago. incorporating the knowledge in the not going to wash. You need representation. company is outdated, he says. In the private sector, an EY survey of It’s marrying up not just the culture of two the country’s major firms found that “If your product is good, normally that’s companies but also two legal systems 13 per cent have Asian managers in the icebreaker — it’s going to fly. But the and two sets of expectations,” he says. their executive teams and five per cent bargaining power of Asian business is Professor Ang says companies entering have Asian directors on their boards. going to increase” Professor Ang says. new markets should appoint the right Some New Zealand companies do “It becomes more important to align business partners, and make sure they make appointments to represent their within a board rather than say ‘I don’t have people in management and around markets. Both Haier and Synlait have care what you think, we have got quality the board table who understand the new BOARDROOM | 21

Shamubeel Eaqub Berlinda Chin Professor Siah Hwee Ang Patrick English Sean Kam

territory. He says that if a company has this His success story is one of maximising RESILIENCE AND THE BOARD level of expertise in people at its core, it opportunities and he admits that being a Shamubeel Eaqub, principal economist will learn rather than just solve a problem. sociable, open person helps to break down at New Zealand Institute of Economic the stereotype of a shy academic Asian. Research, says it’s important that “An organisation that wants to improve businesses don’t lose sight of what itself should learn something, but Being part of a growing business operating they’re trying to achieve, which when you outsource the problem all here, he is particularly interested in the should be a group of directors who the time, you’re learning nothing.” domestic market and how it is diversifying. are capable of doing the job well. “The population mix is changing and CLOSER TO HOME That said, he says diversity strengthens a organisations need to address that in terms Given New Zealand’s changing demographic, company’s resilience and it’s about bringing of their mix so they are well-positioned to it’s not just international markets that people in rather than forcing others out. take advantage of the changing customer companies should be considering. Sean demographic within New Zealand,” he says. “It gives you much better governance Kam is the only Asian New Zealander to be because you’ve got lots of different on the executive team of an NZX50 company This means recognising customers’ cultures points of view and are better at in recent times. He was the chief financial and learning what may encourage them to identifying opportunities and risks.” officer for NZX-listed company Heartland use your business’ services – or put them off. Bank, and is now chief financial officer for He gives an example of giving a gift wrapped Eaqub completed his schooling in New the life insurance company Partners Life. in black paper – inoffensive to a Kiwi, but Zealand and attended university here, and denoting death to someone from China. he identifies as both Kiwi and Bengali. He says he’d like to see more ethnic Even the way a Kiwi would approach a diversity in business but change takes business deal is likely to be different; “If your product is good, time and shouldn’t be rushed – plus it’s Sean says the Chinese place more about training the next crop of leaders. normally that’s the importance on building a relationship icebreaker – it’s going to before cutting to a deal. “I do get the sense that people get it, especially when talking to big business, Sean says there are many skilled fly. But the bargaining they understand New Zealand works in a people of Asian ethnicity who could global economy that’s changing rapidly.” power of Asian business add diversity to New Zealand boards, is going to increase” but he says it really is up to each After all, it is a conversation that’s started individual to forge their own path. and will continue as companies realise they need to bridge a cultural gap. People often ask him where he comes Berlinda says that it is important for from, and Sean is quick to say that businesses to have an ethnically diverse as a second generation Chinese New leadership team, but that skills should Zealander, he hails from Takapuna. Even always come first. She is not a fan of then, some people tell him his English quota systems, which she believes create is very good. Sean is part of the New a superficial focus on gaining diversity. Zealand Asian Leaders group, a network set up by prominent lawyer Mai Chen to encourage up-and-coming Asian leaders. 22 | BOARDROOM

Room to move Change is one of life’s inevitabilities. It affects us all at some stage, and almost every organisation at some level. We know the theory: if we don’t change, we stand still. That makes change a strategic imperative that most directors will readily acknowledge. But that doesn’t make it easy. By Angela Scaffidi

Change is most often driven at two levels: Create a dialogue: give people the chance illusive hope. Only by harnessing these from the board, who are looking for to express what they’re going through, and emotions can we move to the Room of transformation, whether it’s exploring a for the organisation to respond accordingly. Renewal, in which our energy returns with new market, adapting to new technology enthusiasm and learning for the future. For change to be successful, we need or responding to economic pressures; a decent working understanding of the Through the Four Rooms, people learn or by management, who are seeking to people who are being asked to change. how they can influence change by improve productivity, refine customer How are they feeling about what’s taking responsibility for their feelings service or change team dynamics. happening? What do they think of the and actions. Those leading the change Regardless of the size or scale of change future and where they’re being asked to also get a much clearer picture of – or whether its genesis is strategic or fit in? What are their hopes and fears? how people are responding. tactical – the reality and challenges of How these conversations take place change are the same. It is people who have One way we’ve started to get a better has to suit the changes we’re seeking. to change, to adopt new business processes picture of these emotions is with a tool Photographs might be used to start and objectives, to create new relationships called the Four Rooms of Change®. the conversation or draw out feelings, within and outside the organisation, and, The Four Rooms was developed by perceptions and desires for the change in many cases, to make themselves anew. Swedish organisational psychologist process. Avoid the temptation to over- It is the experience of people, who respond Claes Janssen in the early 1970s to help facilitate; it’s all about what the people, with both reason and emotion that will people reflect on their responses to not the facilitator, are saying. Other dictate the success of the programme. change. Organisational development means – including informal conversations Organisations that put in the effort to plan expert Marvin Weisbord describes it as “an and pulse checks – may be used as well to change rationally (and most do) must also enormously effective way of freeing people find out what people are going through. put in the effort to understand and respond to experience whatever is going on”. To reach the people caught up in change, to its non-rational elements. While one The four rooms – or psychological states of you need to think beyond the rational. can’t pretend to do it perfectly, people mind – are Contentment; Self-Censorship in any situation will respect a sincere and Denial; Confusion and Conflict; and Angela Scaffidi is a partner at effort to appreciate and connect with Inspiration and Renewal. What people feel trans-Tasman communications how they are feeling and responding. and how they speak differ in each room. consultancy SenateSHJ and leads their change practice. She is Of the many possible approaches to In the Room of Contentment we feel relaxed Australasia’s only accredited user connect with people as they go through and in control. If we’ve been challenged by of the Four Rooms of Change®. change, there are three to highlight. some inconvenient truth, we might move to

Keep things real: avoid the language the Room of Denial, in which we talk about

of the MBA and keep honesty and change behind a mask of outward calm.

respect as non-negotiable values. Self-censorship won’t last through real Engage people: use a narrative that is change. Soon we might find ourselves worthy of people’s efforts to change in the Room of Confusion and Conflict, and tell a clear, compelling story which grappling emotional demons such as connects both logically and emotionally. sadness, anger, fear, self-doubt and 12 Register now at iod.org.nz CPD POINTS IOD14058/1 24 | BOARDROOM

In distinguished company In conferring Distinguished Fellowships this year, the IoD honours three directors who have not only had long careers in governance but have also been generous in giving back to the business community. By Breanna Cullen

DENHAM SHALE “The sooner you can get that industry for Diversity programme, and says he’s A lawyer, director, and past president of knowledge, the better. But it’s not an pleased to see more women in New the IoD, Denham Shale says he has always essential ingredient to be able to accept Zealand boardrooms. He also welcomes sought to be more than just the solicitor an appointment, because the red flags the broadening of the programme to on the board. And according to those who that you see in the boardroom come up the embrace diversity in its widest sense. have worked under his leadership, he is. same way no matter what the business is.” During his tenure, the IoD also took “His style of direction and chairmanship is “I can think of three companies where its initial steps toward the Chartered consistently ‘Denham’– wise, kindly, astute, I had magnificent orientations. ZESPRI Membership pathway. He says, “I think calm, collegial, courteous,” says Warren was one, where I had a week in the Bay of it’s first class. The Chartered Membership Dalzell, who served on the IoD National Plenty visiting orchards, pack houses, and pathway will give the role of directors in Council under Denham’s leadership. “His the port to learn how the organisation New Zealand a more professional identity ability to find consensus, to sum up, and operated and what was important.” and assist members in advancing in their to achieve pragmatic resolution typify profession. To see this coming into being is Denham advocates an orientation that his debate management. He projects very satisfying for me as a past president.” also covers the company’s culture and a relaxed ‘silver fox’ demeanour, but the standards of governance expected. Denham says he feels privileged to have things get accomplished on his watch.” been made a Distinguished Fellow of the He has been involved in sectors from Denham joined the IoD in 1989 after IoD. “For your peers to determine to do retail to rescue helicopters, and enjoys securing his first major board position. that—I feel very honoured and humble.” the variety that comes with life as a Having served as a legal adviser to Les Mills professional director. He says serving Corporation for 20 years, he was asked BRIAN CORBAN as the sole Kiwi on two international to join the board when it listed in 1985. Brian Corban’s career has spanned boards—Munich Reinsurance of the spectrum of business and is one Back then, he says, regulations Australasia and OceanaGold—has been characterised by family values, good were not as stringent and directors’ the highlight of his governance career. stewardship, and a belief in giving back to duties not as well understood. “Both had wonderful executive teams the community. “Now, directors need a much deeper and very intricate financial structures “Brian is first and foremost a man of understanding of how the business where derivatives prevailed, making integrity,” says IoD vice-president Michael operates, the intricacies of the industry an understanding of IFRS essential. It Stiassny. “It is this attribute that he brings it operates in, and its financial position.” was tremendous to be involved in the to every decision he makes. While you may international culture of boards with He says that the crucial ingredients not agree with every view he takes, you members from different backgrounds.” for developing that understanding can be reassured that you will be able to are an ability to determine the most Having served as President of the IoD debate and discuss every issue. Brian’s important issues affecting the company’s between 2011 and 2013, Denham oversaw ethical compass is unerring and makes his success, and an in-depth orientation. the introduction of the IoD’s Mentoring Distinguished Fellowship well-deserved.” BOARDROOM | 25

“It was tremendous to be involved in the international culture of boards with members from different backgrounds.”

DENHAM SHALE

“If I’ve learnt one lesson in life, it’s to get a good Denham Shale has extensive a director of Auckland Council CEO. One who shares experience across a range of Investments Ltd and a member of the the board’s vision, who industries. He is currently chair of Auckland Museum Council (amongst will work with the board, The Farmers’ Trading Company and others). He remains a consultant who sets high targets sits on the boards of Carlaw Heritage at Corban Revell Lawyers and and and achieves them” Trust, Consortium Ltd, OceanaGold was made a Companion of the New GRAHAM HEENAN Corporation (Canada), Turners Zealand Order of Merit in April 2009 Group NZ and Whitcoulls 2011 Ltd. for services to the community.

He got his start in governance at Graham Heenan serves as Les Mills Corporation, and was soon chairman of Abbott Insurance appointed to chair Kensington Swan. Brokers Ltd, Bellmor Engineering He has been a director at Wrightson Ltd, and InterCity Holdings Ltd, as “I believe in servant Ltd, ZESPRI, Power New Zealand, well as consulting and being on the leadership. A good Owens Group and South Canterbury board of South Port New Zealand chairman shouldn’t Finance, and chair of Otter Gold, Ltd. He has a long association be leading as an Dunedin City Holdings Ltd and the with DB South Island Brewery Ltd, act of ego, but an Japan New Zealand Business Council. having managed the firm’s South act of service.” He has also chaired the Mercy Hospice Island operations from 1986-1992 Auckland Foundation and served on and now serving as its chairman. BRIAN CORBAN the Piha Surf Life Saving Club board. His governance career has included Brian Corban is a former chair of directorships at Selwyn Plantation Television New Zealand, Radio New Board, Dairyworks Ltd, Canterbury Zealand, WEL Energy Group and Linen Services, and Canterbury Genesis Energy. He is a former deputy Health Ltd. He served on the chair of the Broadcasting Corporation Canterbury District Health Board of New Zealand and KiwiRail. He is a between 2001 and 2004, and former director of Ports of Auckland, chaired Liquorland NZ Ltd’s franchise SKY Network Television, Power New advisory board for seven years. Zealand, Clear Communications, He is a Fellow of the New Zealand South Pacific Production Company, Institute of Management and and many private companies. Today, holds a Bachelor of Commerce Brian is chair of Ngatarawa Wines, in marketing and accounting. West Auckland Trust Services, the Melanesian Mission Trust Board, the Royal New Zealand Navy Museum, 26 | BOARDROOM

The Corban name is synonymous with the “I believe in servant leadership. A good GRAHAM HEENAN New Zealand wine industry. Growing up chairman shouldn’t be leading as an Despite 21 years’ experience as a director in the family business, Brian was exposed act of ego, but an act of service. And and appointments ranging from the liquor to governance from an early age. While that means sometimes leading strongly, to laundry industries, Graham Heenan still at school, he read company board but sometimes leading gently and says he was surprised to be made a papers, agendas and minutes to his encouraging people to go in the right Distinguished Fellow. father, who was partially blind. At 26, he directions and ask the right questions, “It’s stunned me, really – I look at others was appointed company secretary of the rather than turning on an individualistic who are Distinguished Fellows, many of Corbans holding company, which controlled star performance,” says Brian. whom I really look up to, and I’m humbled the family’s shareholding in Corbans Wines. Since joining the IoD in 1989, Brian has and honoured to be part of it. I’m chuffed.” After establishing Corban Revell Lawyers served on the Auckland branch committee, Graham got his start in governance with in 1977, Brian juggled legal work with his the IoD National Council, and as a mentor in a place on the TAB board in 1993, an involvement in the family company. In 1985, the IoD’s Mentoring for Diversity programme. opportunity that arose from his interest he was offered the deputy chairmanship “I was brought up in a generation where in harness racing. His employers at of the Broadcasting Corporation of we received free education… so I’ve DB Breweries gave their blessing, and New Zealand. With the restructure of always felt that we owe the community he soon joined their board too. In broadcasting in 1988, TVNZ became a that paid for our education,” he says. 1994, he says, he took a year off from state-owned enterprise and Brian was his executive role to help get a family appointed its foundation chairman. He credits his late grandfather Assid business off the ground. However, over Abraham Corban, founder of Corbans “I used to work in my legal practice, the course of that year, he was offered Wines, with the values that have Corban Revell, in the mornings, and every – and accepted – four directorships. shaped his career as a director. afternoon I worked in my chairman’s “There was really no turning back, and office at TVNZ because the then-CEO “My grandfather was a great man and he I’ve been a full-time director ever since. Julian Mounter wanted me close at hand brought up the family according to very I never did get back to executive life. – we were doing so much so quickly.” strict principles. In 1922 he wrote a letter to his son, Corban Assid Corban, who was He’s been a member of the IoD since 1994, His career includes the chairmanship of studying medicine at Otago University, and and heavily involved in accreditation—a Genesis Energy, Radio New Zealand and he said, ‘I sincerely trust and pray that framework from which Chartered Director WEL Networks, but one experience stands our heavenly Father will bless you with was born. He is one of two support out. In 1993, he was at his desk at Corban health, strength and wisdom that you may people for the Canterbury branch’s Peer Revell when then-Minister of Maori Affairs be a credit to yourself and your people Support Programme and has presented Doug Kidd called and asked him to serve and by the help of God be useful and of at his local Governance Development as a member of the Waitangi Tribunal. some benefit to the human race. Wear the Programme for the past three years. “It just about bowled me over. A number cloak of humility and fear not to always “He’s generous with his time and gives back of my business colleagues were mystified do right in the sight of God and man.’“ to experienced and aspiring directors alike,” as to why I’d want to get involved in such “This has always stuck with me and in says Ray Polson, who served alongside a thing, because it was in the days when everything I do, I’ve tried to be guided Graham on the IoD’s Canterbury Branch the assertion of Maori rights was not very by what my grandfather said.” committee. “Graham has a strong moral popular, but I can tell you it was one of compass and his common sense approach the greatest experiences of my life.” to complex business and political issues Serving the community remains a make him effective on any board.” cornerstone of Brian’s practice as a To date, his career has spanned almost director. He has chaired the Corban every sector imaginable – from forestry Estate Arts Centre and West Auckland to tourism, manufacturing to health – and Trust Services. He is also a trustee for Graham says this variety is one of the most the West Auckland Hospice Trust and a enjoyable aspects of his role. Over 20 patron of the Henderson Heritage Trust, years in governance, he has seen a change the Falls Hotel Preservation Trust, and in mindsets around the board table. the Waitakere Auckland Brass Band. BOARDROOM | 27

“In the late 80s and 90s, boards had He says that in future, boards will family venture to a successful player no fear of failure and were aggressive need directors with an understanding in the FMCG market and his 20-year about growth. Now, directors are of modern marketing, social chairmanship of a joint venture between now more concerned about defensive media and digital technology. DB Breweries and the Licensing Trust. strategies and risk management.” “The next wave of directors, as I see “There’s not been one time in that whole “We’ve come a long way in health and safety, it, will be women – which thankfully 20 years that there’s been a debate technology, and data analysis. In the 90s, is starting to happen now – young we haven’t been able to easily resolve, decisions were often made on gut instinct marketers, and IT experts.” because the relationship between the rather than on research and analysis.” parties has been so good. And it comes His advice for new directors? down to the people, really – both sides He says that to be effective in governance “Go to IoD courses and understand what are determined to make it work.” today, directors must be able to set good governance is and what you’re in for. clear goals, formulate a long-term But first and foremost, he says, it’s Cut your teeth on an NFP or something strategy, and focus on their vision. the people he’s worked with. “I’ve small, but make sure the board has met some fantastic people – “If I’ve learnt one lesson in life, it’s to get experienced directors you can learn from.” capable and inspiring people.” a good CEO. One who shares the board’s He recommends aspiring directors vision, who will work with the board, who look within their own industry, tap all sets high targets and achieves them, the contacts they can, and be able to who reports honestly and transparently articulate their unique selling point. – in other words, is straight-up – who understands the company and the industry, Asked about his career highlights, Graham and who has good people skills.” lists growing Hellers from a small

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AND THE

FOOD CHAIN

Does demonstrating a caring, compassionate side at work limit your chances of promotion – particularly if you are a woman? Sharon Stephenson examines the politics of power in the workplace

There’s a scene in the American TV given what they want, over-apologising, “And it might sound terrible to say it comedy Modern Family where one sharing too much personal information, but baking is what you do for friends, of the characters is starting work and yes, baking for their colleagues. not those reporting to you!” at her father’s company after being It is a controversial position and, you might Interestingly, the higher up the corporate out of the workforce for 20 years. think, based on an outmoded stereotype food chain Barlow moved, the less pressure On her first day, keen to make a good of leadership for both men and women. there was to conform to stereotypes. impression, she brings in a plate of But like any stereotype, it has quite a bit “For me, it was easier the more senior home-baked biscuits for her colleagues. of support. A recent reprint of this self- help book saw it almost instantly re-enter I became, because there’s simply “Wrong move,” admonishes her father. The New York Times bestseller list. more respect for what you can do. And at higher levels, I think people “You don’t want the staff to like you, Auckland director Norah Barlow laughs understand that the softer side doesn’t you want them to respect you,” he when I ask if she’s ever baked for her staff. necessarily equal weakness.” says, removing the plate of biscuits from his daughter’s hand. “No, but mainly because I’m a hopeless Former Auckland City Councillor and baker and honestly can’t see how anyone current director of Turners Auctions, It’s a move that American author Dr Lois could have the time to do that!” NZ Thoroughbred Racing and Tax Frankel would no doubt applaud. The Management NZ, Victoria Carter, bemoans former psychologist and author of Nice However, the director (and former CEO) the lack of role models of women (and Girls Don’t Get the Corner Office (2004) of Summerset, Cigna Life Insurance, men) who have “appeared to retain believes women need to stop behaving Ingenia, Cooks Food Groups and Virgil their softness and been effective”. like ‘nice girls’ if they want to be paid Monitoring, believes Dr Frankel is correct when it comes to women’s ‘soft’ skills. as much, promoted as frequently and “Partly this is because society still has given the same power as men. “Soft can look weak and if someone is that view that particularly if you’re looking to promote, then weakness in a woman and you’ve made it to the Her list of ‘mistakes’ that she feels decision-making is a negative,” says Norah. top, you must have trampled on may hinder women from getting ahead people along the way,” she says. generally fall into the category of On a practical level, Norah believes showing a softer, more nurturing side it’s “simply too hard to be friendly “You only have to look at some of the at work. These include waiting to be with people you may have to fire!” language and words that society BOARDROOM | 29

uses, which aren’t always flattering, warmth helps you connect immediately to describe women at the top – for with those around you, demonstrating “You only have to example, fragrant bulldozers! We that you hear them, understand look at some of the need to get better at recognising and them, and can be trusted by them.” valuing women’s softer sides.” language and words CEO and Director of Redvespa When she was younger, Victoria says Consultants, Sarah Gibson, definitely that society uses, which she often covered up her softer side comes down on that side of the debate. isn’t always flattering, so it didn’t look as though she couldn’t “Being authentic and genuine is do the work or cope with stress. to describe women at part of who I am and, I believe, one “But over the years I’ve felt a lot more of the reasons that we’ve built a the top – for example, comfortable being empathetic and asking successful business,” says Sarah. fragrant bulldozers! We questions of colleagues or people in the “It’s not always easy and I still have to businesses where I am a director. I don’t need to get better at make the tough calls, as anyone leading feel it makes me weaker but actually shows a business does, but I can do that in a recognising and valuing that I have a compassionate and caring side. caring way because I think I’m making These are important qualities for both men women’s softer sides.” the right call. In board meetings I’m probably aren’t given enough credence.” frequently the one asking ‘how will our There are signs of change. Over the last people feel about this decision?’ It makes decade there has been growing recognition us all consciously stop, be mindful of of the importance of soft skills for both what we’re doing and consider feelings men and women business leaders. The among our insight of the business.” thought-leading Harvard Business Review Sarah is proud of the fact she has baked (HBR), for instance, has published for staff. “I also bake for morning tea articles and research stressing the need shouts we take to our customers! I love it for business leaders to focus on soft and so do the recipients. It’s one way of skills as well as technical competence. demonstrating I really care for everyone. Leaders are encouraged to show a I’ve also made meals for the families of more authentic, human side, be better our staff when circumstances have meant communicators and more collaborative it’s hard for them to focus on cooking for and communal in their approach. their family. Sadly, I can’t do that In an HBR article Connect, then lead 1, the as much as I used to because authors quote a study of over 50,000 I’m travelling more but I leaders which found that only one in operate on the belief that 2,000 was considered a good leader by I’m not working business to employees if they were also considered business, but rather human unlikeable. The maxim of it being better to to human. My focus is on be feared and respected than liked does doing good business as a not necessarily ring true. Demonstrating vehicle to deliver value for competence and strength may be a route all stakeholders and care is to leadership but they suggested warmth an important part of that.” and likeability was far more potent.

To quote from the article: “Warmth is the conduit of influence: It facilitates trust and the communication and absorption of ideas. Even a few small non-verbal signals – a nod, a smile, an open gesture – can show people that you’re pleased to be in their company and attentive to their concerns. Prioritizing

1 Connect, Then Lead, Amy JC Cuddy, Matthew Kohut, John Neffinger, Harvard Business Review, July-August 2013 30 | BOARDROOM

longPlaying gamethe A third-term government usually scrabbles round for ideas. But not the third-term National- led government. It will continue with a business-friendly line but it has new things to do and political commentator Colin James predicts that it has a fourth term in its sights

John Key presents the government as hugging There will be two hangover bits of But no other big deregulations are planned. the centre. That is to reassure middling deregulation this term, now that Key has The government will continue the first voters. Actually, this government has (with ACT) a majority for two measures two terms’ fiscal consolidation plus deregulated more and been more business- that stalled last term when the Maori development of a full state balance friendly than any since Ruth Richardson Party and Peter Dunne opposed them. sheet, infrastructure investment, departed Jim Bolger’s cabinet in 1993. One is the Resource Management Act. It principally in roads, broadband and Richardson’s radical style cost the National proposed many process improvements, irrigation, petroleum and minerals government votes through the following which Labour backed, but also changes to exploration and exploitation, trade six years. So before they won in 2008, Key objectives, which a majority blocked (but deals and public service reform to do and Bill English vowed to adopt 1996-2007 which nevertheless may be toned down). The more with less and to get agencies to Australian Prime Minister John Howard’s other is labour market deregulation, making cooperate on ‘outcomes’ or ‘results’. model: do some reform each term but tea and meal break rules more flexible and not so much as to lose middling voters. further limiting collective agreements. BOARDROOM | 31

BRUSHFIRE ALERT adapted from ACC practice for aspects Another continuity will be the usual ad hoc of benefit reform. The idea is that an “These strategic aims fire-fighting when issues emerge that cause ‘investment’ in preventing someone going are business-friendly public outcry or political embarrassment. on a benefit and staying there yields a dividend equal to the money saved by – but much less easily Some will likely result in more not paying that benefit and associated regulation – as in the first two terms’ recognisably business- costs such as health care and crime. tougher accountability for directors friendly than specific and financial advisers in the wake of A child growing up without good nutrition the finance companies’ debacles, more and without some necessities – and policy changes that make stringent building codes in the wake especially a child who is given no or poor doing business easier in of the Christchurch earthquakes and cognitive and emotional development leaky homes, and tighter workplace in the very early years – is less likely to some direct manner.” safety laws and administration after get schooled, join the workforce, pay the Pike River mine disaster. taxes and bring up the next generation 2017 re-election risk that falling investment of citizens well. The 2014 Budget slows economic growth if investors worry Another second-term brushfire was took a small step along this track. about a possible change of government house affordability, on which ministers to a Labour-Green one pushing much scrambled to be seen to be doing English wants to extend this thinking stronger environmental regulation. something. Concern that regions were to other social policy. That is a far cry being left out prompted Key to announce from the palliative spending which A fourth strategic aim, potentially a big a swag of roads and bridges at National’s much of welfare has become. It is very gain for business but very hard to do, is to conference in July. In the election campaign challenging to devise and put into effect implement the Productivity Commission’s there were many announcements on but promises real benefits if done well. July report on legislation and regulation: conservation issues. Rising criticism Taxpayers are more likely to back it. getting law fit for purpose and keeping it of foreign purchases of land and some that way. A small start was made in 2009 companies put ministers on the defensive. RAISING THE BAR but didn’t go far. Don’t expect much in the Related to this is a major shift in education next three years but a well-founded and There will be brushfires this term. Not from the factory system of the twentieth durable programme established this term least, Tony Ryall’s squeeze on hospitals century to one centred on lifting the quality could bring gains over the long-term. has left them short of money or staff or of teachers’ interaction with children. both, a legacy that bothers Bill English. These strategic aims are business-friendly – That requires a much higher entry bar to but much less easily recognisably business- But English has strategic aims. teacher training and constant professional friendly than specific policy changes refreshment – similar to lawyers’ and that make doing business easier in some CHILD POVERTY – AN INVESTMENT accountants’ regimes. The 2014 Budget direct manner. The benefits are indirect One is to deal with child poverty which made a small start with a scheme to and take many years to feed through. Key stated as the government’s top early pay more to top principals and teachers priority for this term. This sounds like to share their knowledge and skills. So the strategic agenda cannot be counted fire-fighting but there is more to it. on to hold and win votes in 2017. But, Down the track, this also requires done well, the changes might be adopted Middling New Zealand does not vote on radical changes in the shape and by an alternative government then – or poverty, which it thinks is someone else’s form of classrooms and schools. in 2020. That is playing the long game, business. But there is discomfort, including Another strategic focus is natural which is where English likes to play. among moderate conservatives – English is resources, starting with water but also one of those – because they value stability [email protected] reframing environmental policy, where and social cohesion and fear too much the government has fallen behind public persistent wealth and income inequality opinion. To be business-friendly, as may destabilise society and the economy. ministers want, policy changes will need Addressing child poverty is an opportunity to focus on opportunities, not costs. to extend the ‘investment’ approach, Ministers will also need to neutralise a The Ranfurly Settee by Kovacs Photographed at Gustavs; model dressed by Encompass; The Tannery, 3 Garlands Road, Woolston

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MADE IN NEW ZEALAND RANFURLY PUREMOTION AMY PUREMOTION NICOLE MADISON PUREMOTION THOR SAVOY MURRAY KENSINGTON PUREMOTION KIRI BARON 34 | BOARDROOM

Is mass media marketing really on the way out? In the last issue of boardroom, the impact of digital media on the advertising landscape was outlined in the article, New dawn in Adland. Long-time marketer and CEO of TVNZ, Kevin Kenrick, puts the case for mass media marketing

When an obituary was mistakenly Depth has not all of a sudden become penetration of smart phones, tablets, published for the American writer Mark more important than breadth. Brands and smart TVs combined with advances Twain his response, famously, was to still depend on big broad populations in mobile and wifi network connectivity remark that “the report of my death – especially when your total market has irreversibly changed the media was an exaggeration”. I feel much the is less than five million people. environment. Always on is the new normal. same way about claims that mass media When it comes to exposure, the reach of The winners are those who embrace marketing is dying or on the downhill slide. TV is unequalled by any other media – in this opportunity to generate more We hear that the age of exposure is gone fact it exceeds all other media combined. relevant and rewarding connections and the new dawn of engagement is It might surprise you to learn that Kiwis with current and potential customers. here. But sitting at the head of a video watch an average of 2 hours 18 minutes If exposure is the ticket to the game, content business and counting many of TV content per day. TVNZ channels and engagement is determined by how of New Zealand’s smartest marketers reach 2.5 million people each day and 90 well you play the game, then the results as clients, what I see is that the new per cent of New Zealanders each week. are measured by the critical third ‘E’ – dawn is all about effectiveness. Not only is TV’s reach vast, but critically effectiveness. There’s no shortage of for retail advertisers, it’s also fast. scoreboards that track performance. The The distinction between successful and risk is that increased governance oversight struggling brands is not how many people Engagement is not a new concept either. can lead marketers to focus on what can be engage with them, but how many people What’s changed is the opportunity measured ahead of what actually matters. buy them. In fact, all the old precepts about to leverage mass media exposure to exposure remain the same. No one ever directly and immediately engage with Take social media. Word of mouth bought something they didn’t know about. individual consumers. The growth in endorsement from a trusted friend has BOARDROOM | 35

always been one of the most powerful You can see it in the rush by traditional forms of promotion and social media print and radio media to incorporate The primary challenge has turbo-charged those conversations. video content for their online sites. You for marketers is more The fact is most of that chat is with can also see it in the way people follow other people – not with brands. The great content from device to device. The fundamental than challenge for businesses is distinguishing America’s Cup coverage was a prime choosing between between the players on the field example of this. People watched the first and the spectators in the stand. race at home on a big screen. During exposure or engagement the day they switched to smart phones, Ultimately businesses bank dollars and – it’s about overcoming tablets and desktops – then at the we need to be wary of unduly focusing weekend it was back to the big screen. consumer indifference. on publicity metrics versus drivers of revenue. Don’t get me wrong, social Increasingly marketers are sharing their media has a key role to play as part of brands’ stories in video format. And here’s invitation to consumers, where the party the marketing mix, but mass reaction the rub: there is such an enormous volume is hosted on an advertiser’s website. Great matters more than mass participation. of content now available to consumers examples of this include Mitre 10’s ‘Easy As’ that the vast bulk of it is overlooked. The DIY guides and Spark’s ‘Tech in a Sec’ tips. Great marketing has always been a blend average Facebook user is reported to of the art (emotional) and the science We use the same approach to market TVNZ receive nearly 5,000 pieces of content (rational). While the rational is often content. In the lead up to this year’s general per day. The odds of someone viewing easier to measure, the most powerful election we hosted an online political your content on YouTube are less than brands are the ones with the strongest survey tool on onenews.co.nz to inform and one in 1,000,000 and the average click- emotional connection with consumers. guide our coverage. Through TV promotion through rate is less than 1 per cent. we achieved more than 200,000 survey Quantitative research provides effective Consumers cope with this avalanche of completions within three days of launch. measurement of what has already content by being ruthlessly efficient at We are using the broad reach of on-air happened. Extrapolating historic filtering out any and all content that is advertising to grow TVNZ Ondemand’s trends to predict the future is useful irrelevant to their needs at the time. The online streams by 78 per cent year on year. in a stable unchanging market. But in primary challenge for marketers is more a dynamically changing environment, While there are many aspects of the fundamental than choosing between understanding consumers’ needs, wants, ‘New dawn in Adland’ column I disagree exposure or engagement – it’s about hopes and aspirations are stronger with, I do agree that the communications overcoming consumer indifference. Many indicators of future behaviour. landscape has irreversibly changed. My businesses are looking for a simple answer sense is the basic tenets of marketing I’m getting deep and meaningful – and and sadly it’s not as simple as replacing remain unchanged. What we’re seeing is that’s entirely the point. Compelling one thing for another, rather it’s about that the progression from awareness, to storytelling is at the heart of effective optimising both to maximise effectiveness. interest, to desire, then to action happens marketing and there is no more emotively Change creates opportunities and today’s in the time it takes to press a couple of powerful storytelling medium than video. smartest marketers are learning by buttons – technology has shrunk the time Moving pictures have always captured doing. We’re working with increasing lag between exposure and engagement. our attention and that’s why television numbers of forward-thinking advertisers TVNZ is excited about the new was so successful when it first arrived on to create branded video content that opportunities created by today’s always- the scene. It wasn’t down to the TV set leverages the reach of mass media TV on world. Control is firmly in the hands itself but because the video format of TV advertising to direct viewer engagement. of the viewer and it’s the advertisers blended sight, sound and motion together Most viewers now watch TV with a laptop, who integrate on-air exposure with and engaged emotionally with viewers. tablet, or smartphone within arm’s reach. online engagement who are most likely The global growth in video consumption Recent Colmar Brunton research describes to deliver marketing effectiveness. over the last few years has been the growing trend towards people using phenomenal. Never before has so much other devices to find out more about what television been watched – it’s just that they’re watching on TV as ‘meshing’. I now it’s on screens of all sorts and sizes. think of it as using TV to extend a party 36 | BOARDROOM

Why corporate bonds are more popular here than in Australia The work of the Australian Financial System Inquiry is yielding some interesting insights into the similarities – and differences – in the New Zealand and Australian capital markets. Most intriguing is the relative strength of our respective corporate bond markets. BOARDROOM | 37

New Zealand has a long history of direct document at all. Any terms sheets, fixed income investment, something that investor updates or other material the has just never fired in Australia. This issuer chooses to employ will be driven is beginning to present a problem for by investor relations considerations as Australia as the first superannuation cohort opposed to the dictates of securities law. moves from the capital growth (equities) • the offer is not a regulated offer, phase to the capital protection (bond) minimising the already reduced red tape phase, especially since much of the current and liabilities. Ross Pennington bond supply is of quasi-equity hybrids. • directors have no deemed liability for misstatements or other defects. As a In brief, the new regime will allow listed Of course the New Zealand road has not result, depending on the issuer’s own companies to issue simple corporate been without its bumps – particularly the governance processes, the offer and due bonds to retail investors without the multi-billion dollar failure of numerous diligence process could be performed full rigours of a prospectus under Part debenture-issuing finance companies. primarily by treasury and investor 6D of the Corporations Act 2001. As This produced a licensing regime for relations personnel. in New Zealand, the deemed liability financial advisers and a prudential of directors will be dis-applied. supervision regime for non-bank deposit Overall, this will result in a package that takers. So far, so understandable. is more appealing both to the issuer But there are a number of differences and its directors. It can be expected to to the same class proposals: The more refreshing regulatory response dramatically reduce the time to market • simple corporate bonds are defined developed out of the recognition that and to mitigate at least some of the as A$-denominated, unsubordinated, if you make the retail bond format costs of issuance. It will also tend to listed bonds with a set term of not more unappealing for investment grade encourage disclosures that are ‘issuer than 15 years, which may have fixed or companies, which have literally a world of led’ and made against the backdrop of the floating interest that cannot be deferred funding choices, then the retail investor issuer’s ongoing disclosure programme. or capitalised. The bonds cannot be will be stuck with whatever is left. convertible and are subject to call The same class requirement won’t Under the old Securities Act with its restrictions. While it is probable that normally pose a problem for equity. extensive disclosure requirements, in New Zealand same class bonds will For debt, the meaning is expanded to regardless of whether it was your first or mostly also be ‘vanilla’ in this respect, include securities having a different your twenty-first issue, its strict criminal there is no explicit attempt to define redemption date or interest rate, or liability on directors for misstatements their characteristics in this way. both. This can include moving from a by the issuer, and its layers of needless • Australian offers still require prescribed fixed to a floating basis, or vice versa. bureaucracy and restrictions, retail offer documents, in the form of a base bond formats looked deeply unattractive The regulations governing the first phase prospectus with a three-year life (akin – expensive, risky and slow. of FMCA implementation had initially to a U.S. shelf prospectus) and an placed an unexpected restriction on offer-specific prospectus containing The Financial Markets Conduct Act 2013 using the same class exclusion for offers the commercial terms of the bonds. (FMCA) has fixed most of these problems. involving a different tenor than an existing This represents a continuation of Criminal liability is now preserved for tranche. The government has since elevated requirements by comparison deliberate breaches, the disclosure announced that different tenors will be to the wholesale format, in spite of requirements in the proposed product permissible so long as some risk/return the rigorous periodic and continuous disclosure statement make a lot more guidance is provided, most likely to be in disclosure regime. sense, advertising has been liberalised, the form of a comparable pricing graph and the red tape is largely gone. For the moment, the balance between that will show how the yields on both the reform and control has been struck more More significant than that, however, are offered debt and the issuer’s existing debt cautiously in Australia. Submissions to the the radical changes to the exclusions securities compare to benchmark yields. FSI have also questioned how much of an regime, which have effectively deregulated And so to Australia, which for some time impact regulatory settings have in holding ongoing offers by high quality issuers prior to the Financial System Inquiry (FSI) back the direct retail market, compared who are prepared to list their debt. has been tussling with the problem of how with market forces and tax barriers. Since 1 April 2014, issuers have been to spur development of its retail bond So, while the simpler corporate able to offer to retail investors quoted market. In December 2010, measures were bond regime has been welcomed by financial products of the same class announced to give effect to a simplified commentators, it is not expected as existing quoted securities on regime for retail corporate bond offers. to change things overnight. the back of a brief cleansing notice, These have now landed, in the form of confirming that the issuer is current the Corporations Amendment (Simple Ross Pennington is a partner with its periodic financial reporting and Corporate Bonds and Other Measures) Bill at Chapman Tripp specialising continuing disclosure obligations. 2014, which has passed both Houses and in corporate law, structured • there is no mandatory disclosure received Royal assent on 11 September. finance and derivatives 38 | BOARDROOM

A golden age? The age demographic in New Zealand is getting older, and it is little wonder that retirement village (RV) and aged care operators have become the darlings of the share market in recent years. The key questions for governments, health planners, and investors is what can we do to meet the needs of this burgeoning demographic and ensure the economic impact on our healthcare system is sustainable. By Richard Catto

All western nations are facing this be unsustainable. The government already around the world that New Zealand dilemma and New Zealand is no funds 80 per cent of all healthcare in New can adopt to improve the value we exception. At KPMG we set out to debate Zealand including ACC, with the remainder get from our healthcare dollar, and and assess these critical social issues, made up from private health insurance, make the system more sustainable. identify what lessons we can learn dental, and out of pocket expenditure from studying approaches overseas, for GPs, pharmacy and diagnostics. AREAS OF FOCUS and make strong recommendations to Integrated Care Traditionally, primary Treasury summed this up when it forecast government, providers, and investors in care (GPs) and secondary care (specialists that, “Our long-term fiscal projections the healthcare markets on how we can and hospitals) have been separated show publicly financed health spending meet the growing burden of disease in organisationally, professionally, and continuing to increase as a proportion an economically sustainable manner. by funding and ownership. There is a of national income from 6.9 per cent in strong argument to fund and organise 2011 to 11.1 per cent of GDP by 2060.” BURDEN OF ILL HEALTH a large part of our healthcare system If the doubling of over-65s by 2036 is The combined effect of aging on healthcare abound chronic disease lines. not enough the problem is compounded and superannuation expenditure would For example, a recent study at Christchurch by the fact that healthcare costs for the absorb all the incremental tax take Hospital found that 62 per cent of all individual grow exponentially from age 60 for the next 35 years, leaving nothing medical admissions were for people over so a doubling in this population roughly for other social programmes such as 65 years. This study found that often the equates to a quadrupling of cost. This education, police, and environment. underlying condition was complicated by is primarily due to the burden of non- cognitive issues. How to effectively manage communicable diseases such as heart STRATEGIES FOR SUCCESS this is not easy. However, there is a greater disease, respiratory illness and cancer. The do-nothing strategy is no longer need to move towards integrated care While we are living longer we are living a a viable option. We believe a more organisations who would manage the full large proportion of our life in relatively proactive approach is required focusing range of care and support services required. poor health. The Ministry of Health’s primarily on two areas. These are: The key advantage is that it enables Statement of Intent for 2014 highlighted • the management of long-term chronic earlier intervention and avoids acute that the average life expectancy in New diseases such as diabetes and hospitalisation particularly for older people. Zealand is now at 79.7 years for males and cardiovascular disease Value-based Contracting Historically, 83.2 for females, but that New Zealanders • the management of the elderly who health services have been contracted on can only expect to live in full health until often have a range of health conditions the basis of doing things for people not on age 67 for males and 69 for females.1 (co-morbidities) including cognitive the results achieved. Many treatments do impairment. Demographic forecasts show that the not significantly change the outcome for proportion of working age tax payers will The good news is that there are a range the individual. Health services and funds diminish, so without significant economic of strategies being explored by both around the world such as the NHS in the growth the burden on the fiscal purse will governments and private enterprise UK or Kaiser Permanente in the USA are BOARDROOM | 39

Demographic forecasts show that the proportion of working age tax payers will diminish, so without significant economic growth the burden on the fiscal purse will be unsustainable.

moving many of their funding arrangements increase in cost as we diagnose more and POPULATION FORECAST to pay for performance. These funders of treat more. Western nations, particularly Statistics New Zealand recently released its healthcare are increasingly contracting countries such as the Netherlands, have population forecast, which indicated that: with providers paying a base fee for access recognised that we often over-diagnose and • New Zealand’s population will grow and a top-up fee for successful outcomes. over-treat. Future technology assessment is from 4.4 million in 2012 to 5.4 million now about better outcomes at a lower cost. in 2036 and 6.0 million in 2061. Partnerships With Communities Good • the population aged 65+ (600,000 health is not just about healthcare and Individualised Care Funders around the in 2012) will increase to 1.2 million medicine. Factors such as housing and world are only just starting to realise the in 2036 and 1.5 million in 2061. education are important determinants of opportunities of harnessing patient power • the proportion of the population health particularly for groups high on the to put pressure on cost and to improve aged 65+ (14 per cent in 2012) deprivation index. However, this is not just lifestyles and drive quality. People with will increase to 23 percent in a better public service initiative, it is about chronic disease are able to self-manage 2036 and 26 per cent in 2061 bringing communities together to support their own condition for approximately and guide their own people and ensure 5,800 hours per annum and need that the basics of housing, education, only visit a healthcare professional for nutrition, family and community support approximately 10 hours in that year.3 Richard Catto, KPMG Advisory Director are integrated with individual responsibility. Richard has worked in a variety of CONCLUSION operational, planning and advisory Asset Light Services. Hospitals are By adopting these strategies the healthcare roles in the health sector for most of the expensive things to build and equip. sector can change the value proposition last 25 years. He was instrumental in Approximately 20 per cent of our health for healthcare and health outcomes for establishing the Regional Health Authorities dollar goes on capital expenditure and New Zealanders. Delaying the onset of and developing many of the funding the maintenance of that infrastructure. long-term conditions into later old age mechanisms for public healthcare. He We can learn from emerging economies will need very different interventions from has had strong operational experience particularly in Asia who are investing traditional healthcare and will improve as a clinical services manager in District heavily in publicly funded healthcare, but the population health considerably. Health Boards. Richard is currently a are adopting asset light strategies. This However, this will only occur when the lead in KPMG’s New Zealand health pushes all but high-tech services out to industry recognises the need to move from practice, and is the deputy chair of the satellite facilities, utilising multipurpose providing healthcare to supporting health international organisation Commonwealth facilities, for example, medical centre, and wellbeing; this way we can ensure Association for Aging (CommonAged) age care, public services, and retail all that good healthcare is good economics. co-located, and using private capital.2

Productivity through Technology Technology is a two-edged sword. In healthcare, technology has created a net

1 (MOH, 2014) 2 NZMJ, Volume 123 Number 1317) 3 KPMG, Necessity: the Mother of Innovation, Low-cost, high-quality healthcare, 2013) 40 | BOARDROOM Raising capital – just another day at the office? From a risk perspective – no. And not even for those who do it on a regular basis, says Heidi Axtell, Managing Principal and Xavier Marguinaud, Senior Risk Adviser, Marsh. For those who rarely raise capital or who are doing so for the first time, such activities are an important and exciting step in a company’s evolution. They also give rise to increased or new liability risks that both the company and its directors should be aware of in order to consider risk mitigation or risk transfer mechanisms

Directors in particular should pay attention • accounting restatements closely Timing is crucial. Considering insurance as a significant number of the most high following the capital raising. for the capital raising is best early in the profile cases brought against directors • inadequate disclosure of merger and planning process so that potential costs in New Zealand over recent years have acquisition activity before the offer. can be accounted for and time allowed to involved alleged misrepresentation in the price/effect the necessary adjustments. WHO ARE SOME OF THE course of public offerings of securities. Insurers take a lot into account when pricing POTENTIAL CLAIMANTS? cover for capital raisings so sufficient time New Zealand’s securities law is in a period • regulators, e.g. the FMA, NZX & overseas to gather this information is essential. of transition which is altering the landscape regulators where business might be of risk. Accordingly, particular caution is operating outside New Zealand. Failing to take into account the effect recommended and although New Zealand is • shareholders counterparties, for of a capital raising on the ongoing D&O still one step removed from the highly litigious example, underwriters, lead managers insurance programme can have unfortunate environment prevalent in countries such consequences. For example, changes to WHAT ARE THE INSURANCE SOLUTIONS as the USA and Australia (where regulatory the company’s capital structure in the FOR THE LEGAL LIABILITY RISKS ARISING action and security class action claims are lead up to or as a result of the capital FROM OFFERS TO THE PUBLIC? commonplace) the overhaul of our securities raising transaction can trigger a common law signals a significant shift; one that any 1. Extending an existing Directors and condition that removes cover for conduct company and its directors considering a Officers Liability (D&O) insurance after the change in capital structure. capital raising should take specific legal programme; or advice on to ensure changes are accounted for. 2. Purchasing stand alone, multi-year cover WHAT ARE THE PROS AND CONS OF Cover of the type referred to above in D&O VERSUS POSI INSURANCE? DO ALL TYPES OF CAPITAL (2) is often referred to as Public Offering • D&O policies cover claims arising out of the RAISINGS GIVE RISE TO THE of Securities Insurance (POSI Insurance) day-to-day activities of a company while SAME LEVEL OF EXPOSURE? and sometimes more colloquially as “IPO a POSI policy is specific to a particular No. The highest level of capital-raising risk Insurance” despite having application capital raising. Given that D&O and POSI is traditionally associated with an initial to various forms of capital raisings. policy limits do not generally reinstate public offering on a US stock exchange once the selected Limit of Liability has by a US domiciled company; while a debt POSI does not make cover provided by an been exhausted this is particularly offering or a private placement in a more existing D&O policy in the lead up to a capital important. Legal liability claims associated benign environment has been considered at raising redundant; nor does it provide with capital raisings are often complex, the other end of the risk spectrum. Various cover for the day-to-day management time consuming and expensive to defend; other kinds of offerings fall somewhere liability exposures of a company’s board even where that defence is successful. in between. Your professional advisers and/or the company itself following the • it is not generally practicable (or should be able to tell you where your capital raising1. This is important to note advisable) to extend a D&O policy proposed offering sits in this spectrum. as a capital raising (particularly an IPO) to provide cover for underwriters, can have both immediate and far-reaching managers, or selling shareholders given WHAT CAN TRIGGER LEGAL CLAIMS implications for an annual D&O programme that its primary purpose is to provide FOLLOWING A CAPITAL RAISING? on which reliance is being placed. Such cover for day-to-day activities. • earnings failing to meet projections a conversation should form an integral • relying solely on cover provided by an contained in the formal offer documents part of your discussion with your brokers annual D&O policy is inherently uncertain or roadshow materials prepared for regarding what insurance arrangements as cover is normally arranged on a year- potential shareholders. are appropriate in the circumstances. by-year basis with terms and conditions

1 POSI policies are distinct from Warranty and Indemnity Insurance (“W&I) policies, which focus on financial loss arising from inaccuracies in warranties and representations made by the seller in a sale and purchase agreement (most commonly for a company or business). BOARDROOM | 41

Heidi Axtell Xavier Marguinaud

open to fluctuations in the risk. An Covered Claim Covered Claim against Directors against the experienced insurance broker will and Officers Company provide you with a structured framework to help you decide your policy strategy. Indemnification HOW MUCH DOES INSURANCE from the Company? FOR CAPITAL RAISING COST? Side C There is no standard “market rate” to gauge No Yes Side A Side B premiums. An experienced insurance broker should provide benchmarking Insured – Insured – Insured – information based on previous covers they Directors and Officers Directors and Officers the Company have arranged but expect them to respect previous client’s confidentiality. A capital Personal Asset Protection Company Asset Protection Company Asset Protection raising can result in one-off insurance costs as well as increases in the pricing Deductible for Deductible for Claims Ds&Os pay $0 Deductible Indemnifiable Claims against the Company of the annual D & O insurance programme due to longer term changes in the risk. The diagram above shows the most common POSI policy structure. There are other variations THINGS TO CONSIDER REGARDING your broker should be able to advise you on. INSURANCE FOR CAPITAL RAISING In our experience, implementing a POSI policy is now a common option in New Zealand for • Get good advice and do it early. For many capital raisings. Where the capital raising reflects a particularly significant transaction best results insurance for capital in the life of a company such as an initial public offering (“IPO”), POSI is always selected. raising exposures should never be arranged as an afterthought. • Your existing management liability insurance can be affected in ways • Be very wary of making decisions based SUMMARY that aren’t immediately obvious on price alone. Policy wordings vary • raising capital, particularly public so get written clarification on the significantly from insurer to insurer. offerings of securities, increases the risk implications of what you are proposing. Insurers do not write risk associated to directors and companies. • Establishing market appetite is very with capital raisings lightly and a • existing liability insurance arrangements important but requesting too many price that is wildly out of step with are unlikely to assist options from insurers can be counter- other quotations may mask coverage • care and planning are critical so that any productive: focus and prioritise for inadequacies. Insurers commonly only insurance coverage is maximised, costs best results. price what they are asked for and this are contained and the insurance is in • Ask your broker about their particular makes the expertise of your insurance place in a timely fashion. experience. Very few insurance brokers broker critical. For more information on capital (even within individual firms) are highly • Be aware that insurance brokers employ raising risks and insurance please experienced with this kind of cover. different remuneration methods for the contact Heidi Axtell (heidi.axtell@ • You should expect to have involvement work involved in capital raising activities. marsh.com) or Xavier Marguinaud in the decisions regarding the Marsh is an advocate of pre-agreed ([email protected]). structure, scope and priorities fees in most cases in the interests of for coverage beyond the limit and transparency; some other brokers excess required. There are various choose to be remunerated via brokerage other important aspects to consider paid by the insurer as a pre-agreed when putting together appropriate percentage of the premiums. arrangements and if you’re not being asked for input you should seek it. 42 | BOARDROOM

Continuing Professional Development – plan your 2015 training

Continuing professional development is key to keeping up in a fast-changing world. It offers the chance not only to gather new information, but also to take time out and see the world from a different perspective. Sharing the learning experience with others not only deepens the learning process but widens networks. The IoD offers a portfolio of courses designed to suit directors at all stages of their careers. For more details and to register, visit www.iod.org.nz New year, new programme This issue of boardroom comes with an inspiring new 2015 Director Development programme developed with your needs and your feedback in mind. You will notice that we have kept our well-established courses, updating content and course formats, as well as adding new courses, a wider range of online modules, and new venues.

“Our aim is to stay current and offer directors as wide as possible a choice in content, course delivery and choice of venues,” says IoD Professional Development Manager Helena Gibson.

Among the changes and improvements to the programme are:

• New venues: as well as being held in the main • New courses: a two-day CDC refresher centres, the Company Directors’ Courses workshop will be available for those who (CDC) will be held in Martinborough, Hanmer have completed the CDC and are either Springs and Nelson, and there will also be preparing for the Chartered Member additional CDCs in Queenstown. Assessment as part of the Chartered • More online modules: alongside our popular Membership pathway or would like a Health and Safety Module there will be online refresher on key governance topics. modules on digital leadership and ethics. For more information or to register, • New content: the CDC and the Audit visit the Director Development and Risk and Strategy Essentials have pages of www.iod.org.nz been refreshed to include updated content, and our very popular Chairmen’s Workshop returns in an updated format. BOARDROOM | 43

IoD partners Otago University in Executive MBA In partnership with the IoD, the University of Otago Business School will launch an Executive MBA in 2015, tailored to include a focus on governance.

The part-time course will run over two and a half years and comprise 12 four-day modules (Thursday evening to Monday) Company Directors’ Course plus a capstone in-company project. The Company Directors’ Course is a week-long residential course Otago University Director of Executive Programmes, Ian Lafferty that has been the bedrock of governance training for says that the part-time programme is ideal for senior managers New Zealand directors for some years. and aspiring directors. “This MBA will offer people the opportunity It covers governance best practice, strategy, understanding finance, to study on a programme which is highly focused on networking, risk, a director’s legal obligations and board dynamics. One of management and governance. The weekend structure allows the hallmarks of the course is its relevance to governance today participants to continue to work full-time while studying and as it draws on the talent and experience of facilitators who are building relationships with like-minded business people,” says currently practising directors. Lafferty, “And it is an honour for us to work with the IoD on this.” We proudly show graduates of recent courses. IoD input includes the use of The Four Pillars of Governance Best Practice as a core resource plus IoD review of all governance-related materials. The IoD will also be sourcing guest speakers for the Thursday evening dinner sessions.

“We welcome the launch of the MBA and its emphasis on raising standards of governance. Like the University of Waikato’s G3 Governance Programme that launched last year, it is complementary to the practitioner-based courses run by the IoD,” says IoD Professional Development Manager Helena Gibson.

For more information, visit www.otago.ac.nz

Health and Safety Online Wellington, August 2014 FRONT ROW: (Left to right) Sandie Shivas, Bryan Styles, Thecla Module attracts praise Johnstone, Mark Adie, Maree Roberts, Elaine Reilly, Darryn Pegram, “An affordable, useful and attractive option” that is “delivered Duncan Scott, Sheryl Carruthers, Christine Kalin in a format that members can easily follow and ensure SECOND ROW: Kyran Newell, Carl McOnie, Prue Younger, Kirsten Bryant, this important issue is regularly addressed” are just Francene Wineti samples of the positive feedback we have received on our THIRD ROW: Bruce Mazengarb, Joe Edwards, Blair Gerritsen, Karen recently launched Health and Safety Online Module. Rolleston BACK ROW: John Hayes, Grant McKenna, Colin King, Nicolas Williams About 275 people have registered so far for the module since it launched earlier this year. Designed to familiarise directors and senior executives with health and safety best practice, the hour-long module covers the importance of health and safety governance, changing legislation, duties and due diligence, liabilities and penalties.

Get in quick – limited places on 2014 courses CPD is like going to the gym – always easy to put it off just another month or two. But if focus on professional Auckland, September 2014 development was your goal this year, there is still time FRONT ROW: (Left to right) Clare Bradley, Michael Allan, Andrew to meet your target. We have limited places available Buchanan-Smart, Cathy Magiannis, Brent Thomas, Grant Abbott, in the Company Directors’ Courses in Auckland and Tracey Richardson Queenstown, and in our portfolio of Essentials courses. MIDDLE ROW: John Milner, Blair Waipara, Raymond Hall, Alistair Lane, Corina Bruce, Owen Gill, Tau Henare All 2014 Director Development courses will earn you BACK ROW: Christine Spring, Hugh Morrison, Natasha Matias, Brian continuing professional development points for the Morris, Graeme Solloway, Jon Broadley, Hayley Buckley, Aaron Rice- Chartered Membership pathway. Edwards 44 | BOARDROOM

Board Services

Spreading the net A push into offshore consumer markets led the board of Dunedin-based BLIS Technologies to widen their search when it came to making board appointments this year.

An award-winning producer of probiotic In light of the company’s ambitions, As a first step, the DirectorSearch health products designed to combat directors held a review to evaluate the team discussed the board’s particular harmful bacteria, BLIS Technologies company’s changing needs and how they requirements with Tony and the board. was looking for two directors with would impact upon the make up of the board. From this the team was able to draw up a specific skill sets and experience. of potential candidates based on specific “We agreed that although the board skills, sector experience, current and past “As an early stage growth company was very strong on science, governance, board appointments and executive roles. we were looking for the best mix accounting and strategy, we really didn’t possible on the board to grow the have the depth when it came to sales and The board was then able to select a shortlist company and focus on developing the marketing. We thought about the sort of of candidates that they wanted to meet business offshore. We are shifting from directors that we might need. Everyone had and interview. Preferred candidates were being a branded ingredient business suggestions of possible candidates, but we identified, and the two positions were into a consumer product business,” agreed that we needed to look beyond our offered to senior director Graeme Boyd says BLIS Deputy Chair Tony Offen. own networks in order to get a wider reach.” and marketing expert Veronica Aris.

BLIS probiotics promote general oral At the time, NZX-listed BLIS had only While Graeme brought years of governance health with lozenges, powders, and male directors on board. Tony says that experience and a deep knowledge of both additives to numerous dairy products. they hoped that it would be possible to manufacturing and exporting to the board, Recently, the company consolidated its address diversity in their appointment. Veronica added international marketing Dunedin manufacturing base and has expertise. With over 17 years of sales and “Primarily, we were looking for skill been working in partnership with Chinese marketing experience within the healthcare and experience but if diversity was pharmaceutical giant, Sinopharm, to industry, she had overseen pharma also part of that equation then that develop a foothold in the Chinese market. product launches, brand management, would be a positive,” he says. marketing, sales and regulatory affairs “Sinopharm, the largest pharmaceutical He says that enlisting DirectorSearch to as well as social media sales strategies. company in China with an annual find two new directors was a logical step. turnover of $NZ21 billion, has nationwide “I think the board was very impressed with distribution and is currently carrying out “All of our directors are members of the the IoD process,” says Tony. “It’s fair, open product trials across 600 pharmacies IoD and we knew that DirectorSearch and transparent, and everyone can see that within three major cities as well a number would have a much wider catchment you have appointed the best candidates. of clinical studies for BLS products.” than any of our own networks.” DirectorSearch came up with more BOARDROOM | 45

“Primarily, we were FINDING A DIRECTOR looking for skill and The IoD maintains New Zealand’s largest database of independent directors. We can help you recruit the best people by searching this database and matching experience but if individuals’ skills and experience with just what you’re looking for. DirectorSearch diversity was also is prompt, professional and impartial. And because you receive a list of names part of that equation that match your requirements, it’s an efficient way to get the best results. then that would DIRECTORSEARCH PROCESS be a positive” Your requirements We’ll work with you to understand the skills, competencies and experience that your organisation requires and what you expect of the new director. This information defines your search criteria. candidates than we had positions for and timings worked well within our timetable. Database search and candidate long-listing A few months on, and BLIS have already We apply your search criteria to identify potential candidates within our database of carried out a detailed induction process, directors’ specific skills, sector experience, current and past board appointments and including a site visit for both new directors. executive roles. We will then distil this into a long list of candidates (usually 8-12).

“This gave them a lot of opportunity to gauge Review and short-listing the company and its strengths. We have After enough time for you to consider the long list, you’ll select a number of also had one board meeting with them and candidates (most likely 2-4) that you would like to explore in more detail. are looking forward to working with both of them. We hold quite high hopes actually.” Selection For more information on Interviews are carried out by a selection committee with the DirectorSearch, visit Services option of including a DirectorSearch representative. for boards on www.iod.org.nz 46 | BOARDROOM

branchnews

1

AUCKLAND New directors attended a Next Generation Directors evening workshop on 16 September.

In the lead-up to the election, our Auckland members heard analysis from political journalist Colin James.

FMA CEO Rob Everett issued a call to arms 2 3 in Auckland, outlining how directors can lift confidence in financial markets.

Auckland Council CEO Stephen Town spoke on how to become a CCO director, focusing on the characteristics of local government governance and how directors can upskill to add value.

4 5

6 7 8

BAY OF PLENTY WAIKATO Members and non-members enjoyed cocktails and insightful presentations from Angela Beatson Waikato Chiefs board member and Dr Anna Rolleston on 27 August. On 9 September, Bay of Plenty members attended a Dallas Fisher told local workshop with Paul Adams and Richard Cashmere on NFPs. Auckland Chamber of Commerce CEO members how the board built Michael Barnett spoke on the growth of China, with David Meys of Marsh offering an overview on a high-performance culture. the protection companies need when trading overseas. BOARDROOM | 47

1 | Auckland Branch member, Kane Wang, 5 | Gretchen Kebbell, Angela Beatson and Virgina 11 | Ang Wilson, Peter Tolan, Sarah Wheldale Stephen Reed (Auckland) Wigley (Bay of Plenty) (Nelson Marlborough) 2 | Auckland Branch member, Colin James, 6 | Brian Scantlebury, Paul Adams (Bay of Plenty) 12 | Paul Bell, Melissa Clark-Reynolds, Julie Baxendine Warren Dalzel (Auckland) 7 | Jen Scoular, Jo Tisch, Ruth Lee (Bay of Plenty) (Nelson Marlborough) 3 | Donna Cooper, Margaret Moore, 8 | Mary Jensen, Grant Robson (Waikato) 13 | Fiona McKissock, Rebecca Redmond, Helen Johanna Boerema-Barr (Auckland) 9 | John Whitehead, Karen Coutts, Carol Stigley, Shorthouse, Liz Hirst (Canterbury) 4 | Will Johnson, Gina Baker and Joelle Stassens Robin Armstrong (Wellington) 14 | Janice Fredric, Tim Andrews (Canterbury) (Bay of Plenty) 10 | Breccan Mcleod-Lundy, John Mendzela (Wellington) 15 | Bevin Watt, Errol Millar (Canterbury)

9 11 WELLINGTON John Whitehead, former executive director at the World Bank, discussed the bank’s complex governance arrangements.

The Aspiring Director Dinner Series wrapped up. Guest speakers addressed the basics of governance, individual pathways to governance, networking and effective CVs. 10 12 Financial Markets Authority CEO Rob Everett spoke on new growth initiatives and opportunities presented by the new Financial Markets Conduct Act.

Rob Cameron discussed the governance demands and the role of independent directors in high growth companies.

NELSON MARLBOROUGH CANTERBURY 13 Members heard from Business Leaders’ Expat mid-Cantabrian Grant Murdoch gave Health and Safety Forum head Julian members an insight into the Australian Hughes, IoD Governance Leadership Centre federal system, leaving the audience executive Felicity Caird, and Kelvin Deaker of with a sense of guarded optimism Marlborough Lines at the Contractor Initiative about doing business in Australia. in Blenheim. Julian spoke on the changes The IoD congratulates Tim Andrews, to health and safety legislation and how who was made a Fellow on 11 August. business leaders have a vital role to play.

Executive director Andy Borland shared Entrepreneur Melissa Clark-Reynolds 14 his experiences taking Scales Corporation presented ‘The Winners’ Guide to Ltd to a public listing on the NZX. Quitting – When Perseverance is Not a Virtue’ on 3 September, sharing lessons Timaru members heard from Sara learnt from the closure of MiniMonos. Lunam, Corporate Services Manager at the Port of Tauranga, on how good Productivity Commission chair Murray Sherwin boards add value for management. discussed why NZ has most of the ingredients essential for a high productivity society and We congratulate the Canterbury yet still lags behind other OECD nations. graduates of the Governance Development Programme, which NZIER principal economist Shamubeel Eaqub wrapped up on 18 September. spoke on leading business in a changing world.

15 OTAGO SOUTHLAND New and aspiring directors took the Tina Symmans spoke about the board’s opportunity to hear from experienced IoD role in communications management, members at Dunedin’s Governance Wisdom presenting a five-step guide for boards on Breakfast, The Governance Leadership communications management. Centre’s Simon Arcus facilitated discussion. Branch chairman Geoff Thomas presented Members enjoyed a site visit to AbascusBio, Clare Kearney with the Otago Southland where Dr Anna Campbell and Dr Tim Byrne Aspiring Director Award. spoke on making science practical.

We congratulate Errol Millar, who has been made a Fellow of the Institute of Directors. 48 | BOARDROOM branchevents A preview of branch events to be held over the next two months. For a full update check the branch section of www.iod.org.nz

AUCKLAND

Next Generation Directors Distinguished Fellow Award luncheon An evening workshop focused on Join guest speakers Anne and David building your governance capability. Norman, owners of James Pascoe 4:30pm – 7:00pm, 11 November, Ltd, for the Pascoes story and the BNZ Partners Business Centre, presentation of Denham Shale’s Deloitte Centre, Level 7, 80 Distinguished Fellow award. Queen Street, Auckland 12:00pm – 2:00pm, 20 November, Denham Shale Wave Room, Mezzanine Floor, Sir Paul Reeves Building, AUT Business School, 55 Wellesley Street East, Auckland

WAIKATO BAY OF PLENTY

Lunch function with Andrew Ferrier 12:00pm – 2:00pm, 12 November, Radio Sport Lounge, Waikato Stadium, 128 Seddon Road, Whitiora, Hamilton

Advisory board workshops Helen Down of Advisory Boards New Zealand Ltd helps you to Melissa Vining Janet Copeland David Irving determine whether an advisory Health and safety in agribusiness board is right for your business. Passion and productivity Guest speakers Melissa Vining and 10:00am – 1:30pm and 2:30pm – David Irving of The Icehouse on the Janet Copeland talk health and 4:30pm, 19 November, Gallagher growth of SMEs in New Zealand. safety for farming businesses. Lounge, Waikato Stadium, 5:15pm – 7:15pm, 26 November, 12:00pm – 2:15pm, 22 October, 128 Seddon Road, Whitiora, Hamilton Tauranga Club, Level 5, Waipa Workingmen’s Club, Devonport Towers, Tauranga Christmas drinks 139 Albert Park Drive, Te Awamutu 5:00pm – 7:00pm, 3 December, Christmas party The business of media Verandah Café and Function Centre, Entertainment and refreshments Popular broadcaster Peter Williams Hamilton Lake Domain, Hamilton to celebrate the 2014 year. on the future of the media. 5.30pm – 7.00pm, 3 December, 12:00pm – 2:15pm, 30 October, Bronze Mt Maunganui Life Guard Services Lounge, Waikato Stadium, Club Rooms, Base of the Mount, 128 Seddon Road, Whitiora, Hamilton Mount Maunganui Main Beach

NELSON MARLBOROUGH TARANAKI

Growing your SME: Lunch function with Sue Sheldon Christmas function from theory to practice Sue Sheldon presents to the Join us for Christmas drinks Lunch function with Dr Deb Shepherd branch at this lunch function. and hear from Rob Jager of of the University of Auckland. 12:00pm – 1.30pm, November 5, Shell Todd Oil Services. 12:00pm – 1:30pm, 30 October, Quench Trailways Hotel, 66 Trafalgar 6.30pm – 9.30pm, 13 November, Restaurant, Chateau Marlborough, Street, Nelson Quality Hotel, corner Courtenay corner High and Henry Streets, Blenheim and Leach Streets, New Plymouth BOARDROOM | 49

WELLINGTON

Lessons from Novopay Featuring Sir Maarten Wevers and Murray Jack. 7:15am – 9:00am, 22 October, Level 5, 88 The Terrace, Wellington

Annual Dinner and Emerging Director Award Sir Maarten Wevers Murray Jack AUCKLAND Clemenger BBDO CEO Peter Biggs Shirley Hastings presents on trans-Tasman trends in Christmas function ph: 021 324 340 philanthropy, plus the presentation of the After-work function, with BNZ chief economist fax: 04 499 9488 Wellington Emerging Director Award. Tony Alexander as guest speaker. email: 6.15pm – 9.00pm, 6 November, Level 6, The 5:30pm – 7:00pm, 3 December, BNZ Hastings auckland.branch@ Wellington Club, 88 The Terrace, Wellington Partner Centre, First Floor, iod.org.nz 205 Hastings Street South, Hastings Napier Port results BAY OF PLENTY Join chair Jim Scotland and CEO Garth Cowie KiwiRail: Where to from here? Jo Perry for Napier Port’s annual results, growth Find out with KiwiRail chairman John Spencer. ph: 021 557 116 prospects and issues facing the ports sector. 7.15am – 9.00am, 4 December, Level 5, The email: 6:00pm – 8:00pm, 17 November, MTG Wellington Club, 88 The Terrace, Wellington [email protected] Hawke’s Bay, corner Marine Parade Christmas function and Tennyson Street, Napier CANTERBURY Christmas drinks and a presentation from Sharynn Johnson Governance in the land-based sector entrepreneur Melissa Clark-Reynolds. ph: 03 355 6650 Members are invited to hear from 5.30pm – 7.30pm, 9 December, fax: 03 355 6850 Massey University chancellor Chris Kelly IoD offices, Mezzanine Floor, email: at an event in Palmerston North. 50 Customhouse Quay, Wellington canterbury.branch@ 5.30pm – 7.30pm, 25 November iod.org.nz BNZ Partners Centre, 203 Broadway Avenue, Palmerston North NELSON MARLBOROUGH Jane Peterson CANTERBURY ph: 021 270 2200 email: Investing with careful hands New Members Lunch [email protected] Adrian Orr, CEO of the Guardians of New Meet the Canterbury Branch committee OTAGO SOUTHLAND Zealand Superannuation, on the role of and other new members. Vivienne Seaton the New Zealand Superannuation Fund. 12:00pm – 2.00pm, 28 November, ph: 03 481 1308 5:45pm – 7:45pm, 20 October, The The George, 50 Park Terrace, Christchurch fax: 04 499 9488 George, 50 Park Terrace, Christchurch Christmas cocktails email: otago.branch@ Annual Fellows and Distinguished 6.00pm – 8.00pm, 4 December, iod.org.nz Fellows dinner ilex Botanic Gardens, Christchurch TARANAKI We welcome Canterbury’s newest Julie Beck Distinguished Fellow, Graham Heenan. ph: 021 632 709 7:30pm – 9:30pm, 20 October, The email: George, 50 Park Terrace, Christchurch [email protected]

WAIKATO OTAGO SOUTHLAND Megan Beveridge ph: 021 358 772 Corporate, not-for-profit Financial Markets Authority fax: 07 854 7429 and trust governance Guest speakers Rob Everett and email: Stuart Walker on changing legal risks Simone Robbers of the FMA. [email protected] 5.30pm – 7:30pm, 22 October, at The 5.30pm – 7:30pm, 19 November, Dunedin Club, 33 Melville Street, Dunedin The Dunedin Club, 33 Melville Street, Dunedin WELLINGTON Jeanette Wogan Cocktail event with Wayne Evans Cocktail event with Vicky Robertson ph: 021 545 013 5.30pm – 7:30pm, 13 November, Ascot Vicky Robertson, Treasury’s deputy chief fax: 04 499 9488 Park Hotel, corner Tay Street and executive, presents at this cocktail event. email: Racecourse Road, Invercargill 5.30pm – 7:30pm, 4 December, The Dunedin wellington.branch@ Club, 33 Melville Street, Dunedin iod.org.nz 50 | BOARDROOM Wellington | 30 Oct - 8 Nov OPINION Dunedin | 15 - 16 Nov Christchurch | 20 - 22 Nov Myths of corporate governance Palmerston North | 26 Nov Napier | 29 - 30 Nov Corporate governance is about opinions, and that makes for endless debate. This month I’m going to introduce what I consider to be five myths of corporate governance. I’m sure you will take exception to at least one or two of Auckland City | 3 - 7 Dec them and I’m sure you will have good reasons for doing so. The more debate we have, the better our understanding. Takapuna | 13 - 14 Dec So brace yourself, here we go. By David Ware rnzb.org.nz The first of my myths: the role of the board is clearly defined. Well actually it isn’t. Let me give you a taste of some of the definitions currently in use. “Strategy, leadership, control of management and reporting” that’s from Cadbury.1 “To ensure that management keeps it promises to shareholders”2 is one, “Monitoring, strategy and service provision”3 is another. And finally Morton Huse, who says that the board should adopt a contingency approach to governance.4 Why does any of this matter? Well, if we can’t agree on what it is we should be doing it makes it pretty hard for us to agree on anything else.

On to my next myth: boards develop strategy. I’m sure that most directors fancy themselves as some modern-day Eisenhower, or Montgomery (or in my case Napoleon) but directors aren’t generals managing the battle from the boardroom, governance is more mundane. Boards for the most part don’t, and indeed shouldn’t, directors have no skin in the game, maybe literally hundreds of academic papers develop strategy. Review strategy – yes, it’s because the thing they have at risk is on governance over the last few years. critique strategy – yes, monitor strategy – something more important than cash – What I can promise you is that you can absolutely. Boards are better at taking that their reputation. Maybe that encourages find a paper that supports your view on dispassionate helicopter view and asking them to take a conservative approach. practically anything. I’ll also promise that you can find a paper that contradicts it. So the difficult questions. That said there are And myth number four: boards put how do you make sense of all of this? Well, occasions when boards out of frustration shareholders first. Companies exist to start by looking for the meta-studies, the or desperation or ego do write strategy make money for their shareholders and the studies of studies. Think very carefully themselves but I would argue that this is board are their appointed representatives. about context – what works in the US very much the exception and not the rule. If only it were that simple. Legally, boards won’t necessarily work in New Zealand. Another myth: independent directors are obliged to put the interests of the company first and on occasion they So that’s my five myths of corporate improve performance. We all like can put employees first – or so says our governance. I do hope you disagreed with independent directors, indeed the NZX’s Companies Act. A company’s interests a couple of them. If you’re interested in this main board has five companies which aren’t always the same as shareholder’s sort of thing I’d recommend you take a look only have independent directors on their interests – think about a company sitting at the IoD’s Linkedin group where you’ll find boards. Independent directors do a great on a pile of cash that shareholders some really useful constructive debate. job in keeping an eye on compliance and would like back. When we go into the reporting and supporting management David Ware is the founder and boardroom we need to juggle the interests in the scary bits. But if there is one thing Managing Director of NZX-listed of lots of different groups and sometimes that the academic literature is unequivocal company TeamTalk. these objectives are contradictory. on, it is that there is no link between company performance and independent And my final myth: academics can help. directors. Maybe it’s because independent As a closet academic myself, I’ve read A Northern Ballet (UK) production based on the novel by Charles Dickens 1 Cadbury. (1992). The report of the committee. The financial 16(s1), S65–S79. doi:10.1111/j.1467-8551.2005.00448.x. governance myths: Comments on Armstrong, Guay, and aspects of corporate governance. ISBN 0 85258 915 8. 3 Macey, J. R. (2008). Corporate Governance: Weber. Journal of Accounting and Economics, 50(2-3), 235– 2 Huse, M. (2005). Accountability and Creating Accountability: Promises Kept, Promises Broken. Princeton 245. doi:10.1016/j.jacceco.2010.10.002 [Startegy Article] A Framework for Exploring Behavioural Perspectives of University Press, ISBN 978-0-691-14802-1. Corporate Governance. British Journal of Management, 4 Brickley, J. A., & Zimmerman, J. L. (2010). Corporate Wellington | 30 Oct - 8 Nov Dunedin | 15 - 16 Nov Christchurch | 20 - 22 Nov Palmerston North | 26 Nov Napier | 29 - 30 Nov Auckland City | 3 - 7 Dec Takapuna | 13 - 14 Dec rnzb.org.nz

A Northern Ballet (UK) production based on the novel by Charles Dickens Level One, Huddart Parker Building, 1 Post Office Square Wellington 6011, New Zealand +64 (0)4 894 1856 [email protected]

client ComplyWith

contact David Shanks

project IoD Ad Campaign

execution Single Page Back Cover June

artwork size 210mm (w) x 297mm (h)

scale 100%

output size 210mm (w) x 297mm (h)

language English

date 05 June 2014

studio Carlos

notes Full colour CMYK

CW0039 IOD Ad SP A4 FA3.indd 1 5/06/14 10:22 am