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The view from the helicopter

Jun 26 2017

IoD Chartered Fellow Tony Carter shares his views on governance, including what directors can do to improve boardroom culture and relationships between the board and executive team.

Despite the numerous accolades received during his career as a director, Tony Carter doesn’t see himself as a senior, experienced director; “I’ve only been a professional, full-time director for about
six years.”

Those words are key – professional and full-time. It is the understanding of governance as a profession that guides Carter’s approach to his governance positions, and his willingness to support the work of the Institute of Directors.

“I do believe what I do is a profession in much the same way as law and accountancy. That’s why I believe ongoing education and training is so important and why I’m a strong supporter of the IoD.

“I do see my role as full-time; while some might criticise mine and other directors’ workloads, the directors that really worry me are the ones who see it as a part-time retirement role. I can think of people I know who are on one board, they never come to anything like this (referring to IoD branch networking and learning opportunities), they dust off the suit once a month and they come along to the board and expect to make a contribution. Bluntly, they are ill-equipped to make that contribution.”

Best known for his roles as chairman of Fisher & Paykel Healthcare, Air New Zealand and the Blues LLP, Carter is also a director of ANZ Bank New Zealand, Fletcher Building Industries and Avonhead Mall, and a trustee of the Maurice Carter Charitable Trust.

The first of seven lessons Carter shares with other directors comes from his early experience working in a cooperative environment. Carter’s governance career began as an executive director and later chairman of Mitre 10 New Zealand. After joining Foodstuffs group as chief executive Foodstuffs South Island, Carter took over as managing director of Foodstuffs in Auckland in 2001. In a cooperative, Carter says there are no secrets from the board, who hear about goings on from many sources in the company – from the executive team to the delivery drivers.

“One particular aspect of those organisations is as a director you have multiple sources of information and the director is often better informed than the CEO. One lesson I learned really quickly is you can’t be economical with the truth in a cooperative board because they know about it better than you.”

Bearers of bad news?

The nature of those cooperative environments meant transparency and openness were a given and that is a lesson Carter says he has carried through to non-executive roles. Carter says directors should expect management to be open and honest, and the actions of the board need to encourage this.
The second lesson is therefore don’t beat up someone for bringing bad news to the board table.

“If management are afraid to bring things up then you will discourage the openness that I think is so vital to any board.”

Carter has no time for recriminations, and has a favourite saying that guides behaviour when bad news arises – “we are where we are”. That doesn’t mean you don’t look back on lessons to be learned, Carter says, but it focuses the board on looking forward to solutions rather than dwelling on who is to blame.

Clearly Carter’s approach is having an impact. In recognising Carter’s selection as 2014 Chairperson of the Year by Deloitte Top 200 judges, Dame Alison Paterson noted that Carter is also chair of 2013 Company of the Year, Fisher & Paykel Healthcare, and 2014 Company of the Year, Air New Zealand. Air New Zealand continues to bring in accolades, the 2016 list includes Airline of the Year (AirlineRatings.com), International Airline of the Year (Roy Morgan) and number one corporate reputation in New Zealand (Colmar Brunton) to name a few.

The chair sets the tone for the boardroom, and Air New Zealand and Fisher & Paykel Healthcare are excellent examples of what can happen when the tone is one of openness and trust. The board plays a key role in an organisation striving for excellence on the world stage, and in Carter’s boardrooms the board both mentors and challenges their management teams.

“I certainly don’t see it as a contest between management and the board. Hopefully both management and the board have the same objectives. I see the board’s primary role is to mentor and constructively challenge management.

“I’ve seen boards at one extreme who were there to make management’s life a misery, and at the other where they didn’t challenge management and were simply there to rubber stamp everything. Neither approach will ultimately add any value.”

Challenge and consensus

There is a balancing act involved in the boardroom when it comes to challenging management. As a former CEO, Carter has experienced this from both sides. As a CEO it was frustrating when a seemingly straight forward matter would become controversial and the board would be uncomfortable. But, Carter says, “without exception those situations would lead to a better decision, even if it was frustrating at the time”.

Sitting on the other side of the table Carter recalls a time when a proposal was put forward, and although the board didn’t really feel comfortable it went unopposed during the meeting. It wasn’t until outside of the board setting many of the board confessed their discomfort with the proposal and it was later dropped. The lesson is that directors cannot be afraid to disagree with a proposal – after all, that is your job and, as Carter’s CEO experience demonstrates, disagreement can lead to better decisions being made.

Building a culture within the board that is accepting of disagreement but being able to come together and reach consensus is the role of the chair. Carter explains that each of his boards has a unique personality and its own culture; “I suspect some of that is simply how they have evolved, but a lot will have to do with the chairman.”

Coming to consensus within a board requires balancing debate and decisiveness – a chair who focuses too much on making a decision can cut debate short whereas one who lets debate go around in circles will never get anywhere. “The key from my perspective is to try to give every director the opportunity to make their points but then intervene and try to find the consensus view. That’s quite a skill.”

What if everyone cannot agree?

“As a director you are a member of a team – everyone has the opportunity to give their input, but once a consensus has been reached you are duty bound to support that decision. It’s a bit like collective responsibility in cabinet.”

The exception, Carter says, is if the consensus view goes against your personal values or you truly cannot support the collective decision; at that point you might find you have little choice but to resign.

It can be lonely at the top

Carter made the move to full-time, professional governance in 2010. In the change from full-time CEO to director there are three key things Carter noticed about life in governance, one of which he hadn’t anticipated.

“Most obviously, you’re on your own with none of the support you come to rely on as a CEO. You answer your own phone, you manage your own diary, you do your own admin. One of the things I try to do is accept invitations from professional firms and come to events to get that stimulation.”

Learning from others is incredibly important, and Carter believes in finding mentors to help you work your way through some of the challenging and unexpected parts of governance.

“Over the years I’ve learned so much from working with and observing some wonderful people. Get some role models and mentors and learn from them. In my case the three who stick out are Dame Alison Paterson, Roger France and John Palmer.”

The thing Carter hadn’t been prepared for was the need to quickly switch focus to different organisations. “In an executive role you focus on one company. When I was a CEO I had one company to focus on, and I spent basically every waking minute thinking about it; all of a sudden I had four boards.”

Coming from a CEO background rather than professional services meant Carter wasn’t used to splitting his focus that way. It was an unanticipated challenge of the role. Understanding how much information you will receive and recognising how much is too much is also a key learning.

“You have to get your head around board papers. I’m a believer in less is more; it’s the board’s job to govern, not to manage. That means staying in the helicopter. If you get into too much detail you will miss what is really important.”

Ultimately the board is responsible for the level of detail management provides, and needs to be clear about expectations. A lot of information isn’t necessarily a good thing, Carter says.

“I’m always nervous about directors asking for more information than they need.”

There are moments when more information can be very useful, especially when joining a board. Carter says it is important for directors to do their due diligence prior to joining a board: you need to know whether the board culture is the right fit for you.

“Talk to the CEO, fellow directors, the CFO. The most important thing to do when you join a board is talk with the other directors on the board– do they hold similar values? Do they have integrity?”

For Carter this is related to another lesson – be careful about the company you keep. It can be lonely at the top, so select wisely the organisations and people you want to be aligned with.

Once on a board one of the most important relationships you will foster as a board member is with the CEO. Appointing the CEO is without question, Carter says, is the most important decision the board makes.

“A good CEO can make the company.”

Carter would know – Air New Zealand faced the challenge of appointing a first-class CEO following the departure of Rob Fyfe. Carter explains that within a company like Air New Zealand it is important to find someone with industry experience. Part of succession planning at the organisation involved bringing someone into the organisation with the purpose of watching their progress for growth into the CEO role. The plan was successful; that someone is current CEO Christopher Luxon, the 2015 Executive of the Year.

The success of Air New Zealand is rightly drawing attention of late and that is in no small part due to the leadership of its board and management. This year Air New Zealand was named most reputable company not only in New Zealand, but across the ditch in Australia too. The actions of those at the top really do make a difference, if the success of the national airline of a small country at the bottom of the world is anything to go by.

Tony Carter has graciously given his time to share these insights with audiences at a number of IoD branch events, most recently in Taranaki
and Waikato.

Seven lessons

  1. Expect your management to be open and honest with you
  2. Don’t beat up anyone for bringing bad news to the board table
  3. Don’t be afraid to disagree with a proposal
  4. Get some role models and mentors and learn from them
  5. You are part of a team and must support the team decisions
  6. Be careful the company you keep
  7. Be careful what you ask for

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