Band of brothers mentality threat to economy

This appears to be the view of columnist Terry Hall in this paper’s November Viewpoint suggesting that there still exists a cosy coterie of exclusive brethren and enchanted sisterhood warming the boardroom seats of the country’s top companies. In other words, it is still an old boys’ network with a few honorary females.

Why aren't more women being appointed to boards? Why aren't there more women directors and where does an aspiring director get experience to qualify for the top flight?

There is no easy answer to any of these questions but the facts are these: we fish from a small pond, and that applies especially to experienced directors.
Big fish get that way through "stream smarts" – acquiring knowledge and experience in their journey along the river of life. Few are overnight sensations.
As New Zealand continues its slide down the OECD performance ladder, this pool is slowly draining, as there is a gradual but inexorable shift away from the "big end" of town to the SME sector - the engine room of the economy.

In large corporates, shareholders demand that the companies they choose to invest in are governed by people of substance and vision. Newcomers seldom get a chance.
Critics claim that transparent and fair appointment methods are not being followed by many boards that instead cite "cultural fit" as a reason for perpetuation of a gerontocracy.
Neither shareholders nor boards seem inclined to allow training wheels into the boardroom and, even if they did, under the current law surrounding fiduciary duty it is difficult to see how the concept of junior directors with reduced responsibility and therefore diminished accountability would work.

However, this doesn’t address the aspiring directors' complaint of being caught in a catch-22 situation where to be considered for appointment, experience needs to be demonstrated.

A large part of the problem is in culture and attitude.

A Listener editorial highlights this: “New Zealand already has hugely undervalued assets – including a natural entrepreneurial drive to start new businesses, even if we appear to lack the skills and drive to expand those beyond the "boat, bach and beemer" dreams of their owners.
We have a great platform on which to build new enterprises – New Zealand topped Transparency International’s recent table as the least corrupt country in the world; an accolade indicating that this is “an excellent place to do business.”
There is incontrovertible empirical evidence that good governance is a key positive determinant of business growth.

One avenue to directing is through senior executive management, but there are clearly supply chain problems. There is a shortage of skilled executives "those with the abilities to be tomorrow's leaders" according to the Seqel Consultants’ report to the 2025 Taskforce. This is a massive threat to our economy. The report also notes that too few organisations have developed succession plans or are fostering the future talent they need.

One avenue to progress up the ladder that runs counter to the general norm is appointment to government boards such as SOEs and other crown “entities”, some of which rank among the biggest businesses in New Zealand.
The Crown Ownership Monitoring Unit has an active policy of promoting highly promising candidates who may have comparatively modest governance experience but compensate for this with demonstrated industry knowledge and a successful senior management track record. This not only is a manifestation of future planning but also encourages cross-fertilisation between the public and private sectors.

In the last week there have been interesting developments regarding gender representation.
The Australian Securities Exchange (ASX) proposes to encourage listed corporates to set gender diversity targets. While some see this as a positive move, others view it as possibly counter-productive to women’s interests.
It is important to be realistic about such aspirational objectives. Change cannot happen overnight unless there are sufficient suitably qualified people ready and available and appointments should always be made on merit rather than gender.

This has been the Year of the Dog with respect to governance. In the wake of the global credit crunch and the self-annihilation of the local mezzanine finance industry, the Capital Markets Development Taskforce has identified the need for a "stepping stones" approach.
Small businesses should be embracing the discipline of governance and adopting structures that are appropriate to their size and ambition. This will enable many to grow and some to become the multinationals of the future, by making them first more sustainable and secondly more attractive to capital investors who invariably demand that their investment vehicles have a board, usually containing one or some of their own people. This, again, is systemically dependent on an assured supply of capable battle-ready independent directors.

There are other encouraging signs. The Institute of Directors has partnered with the Ministry of Women’s Affairs and Business New Zealand to promote women on boards. This is a long-term objective that should address both the supply and demand sides.
However, amongst the next generation of directors, the Gen X-ers of this world who tend to want it and want it now, there are many that will have to serve their time in the ranks of the small and medium enterprises and not-for-profit sectors before hitting the big time.
A hearts and minds battle needs to be waged to convince more SME owners and founders to embrace governance as a means of creating wealth and stability. The Institute of Directors is working on that too.

So, “once more unto the breach dear friends, once more”. There is a role for all to play in raising New Zealand’s productivity and prosperity.