The power of good governance. Avoiding exploitation in your supply chain - Institute of Directors
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board
AUG / SEP 2019
room
Magazine of the Institute of Directors in New Zealand
The power of good
governance.
Avoiding exploitation
in your supply chain.
BOARDROOM DETAILS
boardroom SENIOR LEADERSHIP TEAM
Chief Executive Officer
BOARDROOM IS PLEASED
TO ACKNOWLEDGE THE
SUPPORT OF
Kirsten Patterson
Boardroom is published six times NATIONAL PARTNERS
a year by the Institute of Directors General Manager, Members
Nikki Franklin
in New Zealand (IoD) and is free
to all members. Subscription for General Manager, Governance asb.co.nz
Leadership Centre 0800 803 804
non-members is $155 per year. Felicity Caird
Boardroom is designed to inform General Manager,
and stimulate discussion in the Corporate Services marsh.co.nz
Chris Fox 0800 627 744
director community, but opinions
expressed do not reflect IoD General Manager, Brand,
Marketing and Communications
policy unless explicitly stated. Sophi Rose NATIONAL SPONSORS
General Manager,
People and Culture
Sarah Deans aurainfosec.com
EDITOR 04 894 3755
Aaron Watson General Manager,
+64 4 470 2647 Learning and Commercial
aaron.watson@iod.org.nz Michael Fraser
Please contact the editor for any advertising queries.
COUNCIL kpmg.co.nz
Alan Isaac - President 09 367 5800
INSTITUTE OF DIRECTORS IN NEW ZEALAND (INC) Julia Hoare - Vice President
Mezzanine Floor, 50 Customhouse Quay Dr Helen Anderson – Wellington
PO Box 25253, Wellington 6146 Bryan Graham – Bay of Plenty
New Zealand Craig Hattle – Taranaki
Tel: 04 499 0076 Jackie Lloyd – Wellington minterellison.co.nz
Fax: 04 499 9488 Simon Lockwood – Waikato 09 353 9700
mail@iod.org.nz Jonathan Mason – Auckland
iod.org.nz Vincent Pooch – Canterbury
Trish Oakley – Otago Southland
The Institute of Directors has staff based at the Clayton Wakefield – Auckland
National Office in Wellington, an office in Auckland Sarah-Jane Weir – Nelson
PRODUCTION NOTES
and eight branches. For National Office, phone Marlborough Every effort has been made
04 499 0076. to guarantee the pages of
this magazine are sustainably
sourced and produced using
COMMERCIAL BOARD paper that meets the environmental
BOARDROOM IS PROUDLY DESIGNED BY
Kirsten Patterson, Chair; standards shown below.
Vincent Pooch, Dr Alison
Harrison, Alan Isaac
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04 894 1856 BRANCH MANAGERS
For a full list of branch managers,
see page 46.
When you have finished with Cover photo: An aerial view of
this magazine, please recycle. Waiwera, north Auckland.
CONTENTS
A note from the editor
The front cover of this issue gives you
a taste of the new look and feel that will
be rolled out on IoD products and services
The Agenda
APR / MAY 2019
over the next few months.
INSIDE IoD
14
While a big part of the rationale for this is
simply to ensure our brand remains fresh,
there is a lot of thinking behind it on the 03 CEO letter –
Good foundations
importance of brand perception to modern
business (read more on page 14).
04 UpFront
Alan Isaac CFInstD has taken up the role 34 GLC update
of president. He explains his priorities
for his term – and a bit about his philosophy 44 Out & about
of governance – on page 8. One of his
concerns – the increase in personal 46 Events
liability proposed for directors – is explored
in more detail in the following article on THE POWER OF GOOD
FEATURES
page 12. GOVERNANCE
Recent legal action against subcontracting 08 President puts culture
first
firms involved with the Chorus fibre
16
optic cable project are explored on page
16. Directors would do well to consider
12 Balance of responsibility
the likely regulatory response from the
government should it move to better
14 The power of good
governance
protect workers down the supply chain.
16 Migrant exploitation
On a brighter note, we talk to Philp Carden
from Joyous, who has a new system to 20 Shaping culture through
improve workplace culture – which could questions
also be used to improve the visibility of
subcontractors in a labour supply chain, 24 Questions with Kiri
so such problems can be avoided. Mahutariki
Aaron Watson 31 Jellybeans and board
diversity of thought
Boardroom editor MIGRANT
EXPLOITATION
38 More stakeholders, more
value
26
41 Is digital disruption
disrupting our directors?
FROM OUR PARTNERS
26 Agility? / Marsh
28 Responsible investment /
KPMG
BoardRoom is the magazine
of the Institute of Directors AGILITY?
in New Zealand iod.org.nz The responsive board
Aug/Sep 2019 BOARDROOM
CEO LETTER
Good
foundations KIRSTEN PATTERSON
CEO, INSTITUTE OF DIRECTORS
Tēnā koutou katoa, Key changes proposed include: The art of governance is evolving and you
should rightly expect your governance
Good foundations. They’re as important minimum requirements for constitutions membership body to be alongside and
in building great organisations as they beyond current requirements evolving with you.
are to great buildings. officers’ (committee members or office
holders) duties will be akin to directors’ As part of our evolution we will be launching
Like many not for profits, the Institute of duties under the Companies Act our new brand from September and a new
Directors’ key foundation document is our digital experience and website for members
Constitution. Constitutions are often seen conflict of interest disclosure from the end of the year. So we’ll have a
as boring or dusty things, only pulled off procedures refreshed look and feel which will make
the shelf at the time of the AGM or when us feel fresher and more modern.
power is challenged. Given the legislation access to information for members
governing incorporated societies, the formalising financial reporting But really evolving and building our brand
Incorporated Societies Act, is 111 years old requirements is about so much more than that. Our
it’s probably no surprise constitutions are brand is our reputation, our values, the
considered old and dusty. societies must have a dispute resolution trust we build, and it should reflect the
procedure to deal with both member services and voice you need. Perhaps
The long overdue review of the Incorporated grievances and complaints. most importantly it should champion and
Societies Act 1908 is underway and there position the importance of best-practice
are some key changes proposed that will Rather than just reviewing for compliance, governance out there in the world and
impact on the over 23,000 incorporated we will also be taking the opportunity to show what governance and directors
societies in NZ. That includes us here at review the IoD governance frameworks mean for New Zealand.
the IoD. that the Constitution establishes to ensure
they reflect best practice and are fit for the 2019 marks 30 years of our independence
future. Because we are a membership body from the UK IoD so it is time we reflect
and we are “owned” by you, the members, our strong New Zealand voice. A more
we will be seeking your views and input contemporary reflection of the governance
into the process in the coming months. community and issues facing boards is
also overdue.
What should the governance structures
look like for New Zealand’s leading Strong internal foundations. Strong external
professional body focused on voice. We believe that good governance
governance? We are lucky to have over can be transformational and we need to
9,000 governance experts in the IoD transform, too.
community so we are looking forward
to your feedback and advice. Ngā mihi
Part of reviewing our governance and Kirsten KP
foundation frameworks is ensuring that
we are reflective of, and relevant to,
the director community of tomorrow.
1 Aug/Sep 2019 BOARDROOM
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2 Aug/Sep 2019 BOARDROOM
UPFRONT
Question: How many directors
of a New Zealand registered
UpFront
company are required to live in
New Zealand?
A. 0
B. 1
C. 2
D. 3
Director
Vacancies ANSWER
DirectorVacancies is a cost-effective way to reach our extensive B. Since 2015, all New Zealand
membership pool of director talent. We will list your vacancy until registered companies are
the application deadline closes or until you find a suitable candidate. required to have at least one
Contact us on 0800 846 369. director that lives in New
Zealand (or lives in Australia
Unless otherwise stated, the following positions will remain open until filled. and is a director of an Australian
company). NZX-listed issuers
TARANAKI COMMUNITY TUI ORA LIMITED are required to have at least two
RUGBY TRUST Role: Directors (2) directors who are ordinarily
Role: Trustees Location: Taranaki Location: New Plymouth resident in New Zealand.
Closing date: Applications will remain Closing date: Applications will remain
open until position is filled open until position is filled
In memoriam
The Institute of Directors would like to Development Corporation, the National Authority, Port of Napier, Momentum
acknowledge the passing of two of our Australia Bank, Tower Health and Life, Consulting, the Karori Wildlife Sanctuary
Distinguished Fellows, Rob Challinor Mighty River Power, Ports of Auckland and the Wellington City Mission.
and Michael Morris. and The Warehouse Group. He joined the IoD in January 1990 and
Rob Challinor DFInstD had a He joined the IoD in August 1985 became a Distinguished Fellow in August
distinguished career as a chartered and became a Distinguished Fellow in 2002. He was also a fellow of Chartered
accountant and was a partner at August 2011. Accountants ANZ and become and Officer
Deloitte before embarking on a career Michael Morris ONZM DFInstD was of the New Zealand Order of merit in
in governance. He was a fellow of also trained as a chartered accountant 1997 for services to business and the
Chartered Accountants ANZ and fellow and became the chair of KPMG in community.
of the Institute of Chartered Secretaries. New Zealand. Our thoughts go out to their families
His governance roles spanned many His governance career included work and colleagues.
industries and included the Maori with NZ Post, the Land Transport Safety
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3 Aug/Sep 2019 BOARDROOM
UPFRONT
Ngā mea Waiwai o te
Tūranga Whakataka
APPOINTMENTS The FMA and the IoD have commissioned a te reo Māori
translation of The Essentials of Being a Director.
Director Search The guide, Ngā mea Waiwai o te Tūranga Whakataka, is due for
release in September.
Helen Mexted
Chartered Member, has been appointed to Here is a sneak peek at how it reads, compared with the English
the board of Wellington Regional Council language version of the same advice.
Holdings Ltd via the IoD’s DirectorSearch
service.
Ngā mahi waiwai, kawenga hoki Essential duties and
hei whakataka responsibilities as a director
General
Me pono, me ngākau tapatahi. Act honestly and with integrity.
Jen Crawford
Chartered Member, has been appointed Me mātua manaaki i te kamupene Act in the best interests of the
independent chair of Ashton Wheelans (kei reira ngā aweretanga company (subject to limited
Chartered Accountants. tauwhāiti). exceptions).
Me whai pūkenga tika, wheako Have the right mix of skills and
Anita Killeen hoki hei hāpai i te kamupene. experience to add value.
Associate Member, has been appointed
chair of the Auckland Regional Amenities Me mārama ki ngā mōrea, ā, me Understand risk, and be
Funding Board. urupare ki ngā mōrea me ngā responsive to risks and conflicts.
taupatupatu.
Vincent Pooch Me tuku i ngā pātai uaua kia tino Ask the hard questions until you’re
Chartered Fellow, has been appointed rata ai koe ka taea e koe te tuku satisfied you can make a decision.
to the board of commercial explosives whakatau.
company RedBull Powder.
Ngā mea waiwai
o te tūranga
whakataka
1
4 Aug/Sep 2019 BOARDROOM
UPFRONT
Welcome Welcome and congratulations
to the newest members of the
Institute of Directors.
New Members June-July
AUCKLAND
Charl Malan Tim Wixon Anna Hart
Chris Aiken Grant Mason Craig Young Kieran Hayes
Phillip Anderson Geoff McDonald Cathy Zhang Nicholas Hill
Anirudh Bansal Daniel McGowan Vivienne Hunt
Stephen Barfoot Simon Mckearney BAY OF PLENTY Paul Kerridge
Sara Basheer Dave Mitchell Paul Abbot Andrea Leslie
Denym Bird Danielle Moa Andrew Bishop Damian Lynch
William Black Lucy Neame Aroha Campbell Vicki McClurg
David Boardman Mat Northway Viv Conway Erin McNaught
Charles Bolt Ravi Nyayapati Jessie Cowie Jason Middlemiss
Ean Brown Barry ONeill Brad Deane Stu Munro
Damian Camp Amber Oram Willy Doney Samantha Murray
Dani Chesson Nicola O’Rourke Jason Dowie Carole Peterson
Ben Cochrane Murray Page Kristin Dunne Vinni Pietras-Jensen
Marie Collins Budi Paini Ross Edens Jonathan Prince
Michael Cook Andy Parker Carlo Ellis Andrew Saunders
Bronwyn Coomer-Smit Imogen Parry Kathryn Gardner Keith Shaw
Campbell Cooper Dean Pennell Joshua Gear Mary-Anne Stone
Melissa Crawford Tony Phillips Deb Gisby Mark Sullivan
James Crow William Pike Sarah Hepi-Te Huia Josiah Tu
Mark Debenham Terry Quilty Dianne McQueen Nicholas Tyler
Kevin Drinkwater James Robinson Rebekah Murphy Christopher Vas
Maurice Dubey Lisa Rogers John Olsen III
Toa Faneva Marty Rogers Kay Read NELSON
Kat Felton Peter Rudd Paul Sands MARLBOROUGH
Dawn Folkard Roxanne Salton Richard Searle David Cairns
David Goatley Colleen Seth Michelle Sinclair Nick Entwistle
Aimee Greenhough Brett Shadbolt Aaron Sinclair Pierre Gargiulo
Brent Guild Zeshan Shahzad Megan Struthers Ian Goldschmidt
Ben Harman Andrew Skinner Parewhati Taikato Doug Hattersley
Seith Harrison Nigel Smith Rosemary Turner Waugh Wolfgang Kloepfer
Josh Hosking David Snelling Richard White Sam McSorley
Matthew Houtman Sophie Stanley Signe Wilkinson John Murphy
Steve Howe Elise Sterback Kim Ngawhika
Grant Huggins Glenys Talivai CANTERBURY Ursula O’Donohue
Mike Hutcheson Maurine Talpin Liz Bishop Matt Stringer
Alan Jackson Ronji Tanielu John Boereboom Matt Thomson
Scott Jenyns Narissa Taylor Geraldine Brookman
Kevin Jones Andrew Tubb Pam Clarke
Michail Karpenko Steve Ulenberg Graeme Crombie
Sarah Keene Vaughan Underwood Grant Day
Dean Kelly Mike Wardle Bruce Gemmell
PK Kumar Lincoln Watson Chris Gourley
Misti Landtroop Mark Weenink John Greenwood
Linda Leonard Chris West Fiona Gurevin
Howard Lewis Andrew Williams Julia Hardacre
5 Aug/Sep 2019 BOARDROOM
NEW MEMBERS
Mentoring for Diversity
OTAGO
SOUTHLAND Janine Foster And a special
Charlie Gavey congratulations to the
Jemma Adams Sarah Gillies mentees taking part in our
Anthony Baikie Jason Graham Mentoring for Diversity
Sally Battson Justin Gray programme this year.
Alex Black Reuben Johnson
Ashley Light Liesbeth Koomen Catherine Abel-Pattinson
Bill Thomson Pete Lennox Bayden Barber
Anne-Marie Wells Andy Lowe Elaine Cook
Benjamin Mander Jane Davel
TARANAKI Lisa Martin Jan Early
Lee Banks Kellie McGrath Aliesia Gartrell
Frances Boyce Catherine McKelvey Marina Hirst-Tristram
Cam Eyre Richard McRae Sarah Judkins
Paul Feltoe Maria Mitimeti-Clark Nic Kennedy
David Geraghty Brett Murray Raewyn Kirkman
Paul Goodeve Trishn Nand Victoria MacLennan
Lisa Oakley Arish Naresh Bindi Norwell
Wayne Wootton Kit Nixon Alison Posa
Richard Norris Barbara Robertson
WAIKATO Brent Norriss Renae Smart
Aaron Barnsdall Evzen Novak Julia Steenson
Tracey Bell Ian Redshaw Lana Stockman
Danielle Diprose Colin Reid Sunil Surujpal
Peter Kimber Matt Sheppard Bella Takiari-Brame
Gina Kriletich Nigel Simpson Wendy Venter
Jo Lane Craig Soutar Franky Wang
Kelvin O’Connell Henry Tait
Candra Pullon Cate Tarsau
Willow Salvador Justine Thorpe
Karen Scott David Tweed
Dani Simpson David Veale
Claire Steer Curtis Walker
Rosser Thornley
OVERSEAS
WELLINGTON Wendy Baker
Zainab Ali
Rod Bentham
Dan Bradley
Paris Bree
Nic Brown
Cameron Burrows
Jenny Condie
Phil Cox
Clive Eastwood
Luke English
6 Aug/Sep 2019 BOARDROOM
FEATURE
President
puts
culture
first
Our new President Alan Isaac learned “I trust and respect the chair. I trust and
respect the CEO. I genuinely believe
a lot about the power of culture during that I can contribute to the organisation.
Unless I can be positive about those
his time at the head of the International three questions, I have tended to say no
to opportunities to join governing bodies.”
Cricket Council. He is also something of an accidental
director.
“I didn’t set out to be a professional non-
executive director. It was actually just that
New IoD President Alan Isaac CNZM opportunities presented themselves, I
CFInstD is a risk-averse director, guess. It wasn’t a deliberate strategy.”
something he puts down to his
experience as a chartered accountant. Isaac’s career with KPMG included time
as a managing partner, chairman and
“As a chartered accountant and a partner chief executive. His broad experience
in KPMG, I used to specialise in corporate made him an attractive candidate for
recovery work – receiverships and board positions. On retiring from the
liquidations, mixed with a bit of forensics, firm in 2006, he began a governance
so investigative work,” Isaac says. career that has spanned the worlds of
sport, NFPs, business and the public
“Being involved with lots of organisations sector. He currently holds a number of
where there’s been fraud, where there’s board roles with organisations including
been a company collapse, where the Scales Corporation, Oceania Healthcare,
auditors have been sued, where the New Zealand Community Trust, the
directors have been sued… In terms of my Basin Reserve Trust, Skellerup and the
governance career, that experience, that Wellington Free Ambulance.
background, has shaped my attitude. I’m
quite risk-averse. I like to think I’m very TESTING TIMES
selective about the roles that I take on.”
A keen cricketer, he is probably best-
When considering roles, Isaac applies known for his time as president of the
a personal test – alongside normal due International Cricket Council (ICC)
diligence, of course. There are three from 2012-2014. During his tenure the
things that he has to be sure of. governance structure of the organisation
7 Aug/Sep 2019 BOARDROOMFEATURE
We were criticised for not growing the PRESIDENTIAL AMBITIONS
game – we made the point that the
tournament would be much more exciting.” During his term presiding over the IoD,
Isaac wants the organisation to receive
For Isaac, understanding the source more recognition for the good work it
of concerns at ICC meetings was key undertakes to promote a professional
to finding a way forward. approach to governance.
“People used to ask me how I dealt with “I’d like to think that during that time we
the politics. I used to respond to that can continue to develop the reputation
question by saying ‘I dealt with the C of the organisation, the reputation that
word’, ie culture rather than politics. we have for growing and developing good
I worked hard at understanding the directors,” he says.
different cultures and why people said
what they said, and did what they did.
“Improving the visibility
“When you appreciated how he or she had of the IoD and the
been appointed, the interest in the game
in their country – right from PM level – work it does will help to
there was great pressure on individuals ensure that governance –
to do the best thing for that country.
When a decision was going against that as a profession –
country’s best interest you could help
them explain it back. On one occasion is better understood
I went to Bangladesh and got an audience in New Zealand and,
with the PM straight way – when
generally you had to wait six months. ultimately, improve
That was pretty special.”
The ICC changed its governance structure
governance standards. ”
while Isaac was president, making him the “We are aspiring to be better recognised
was updated and the cricket World Cup last president to also chair the council. as a professional body. It would be nice
reorganised in the format that it was to think that we can develop those
played in recently. “Rather than rotating around the member professional standards and arguably
countries, and effectively being the have world class standards of governance
“I’ve enjoyed the Cricket World Cup. chairperson of the board, the role of In New Zealand.”
It was in my time as president, chairmen president was split in two. The president’s
as it were, of the ICC that we made the role became ceremonial and the board He would also like to see wider
decision to create a 10-team competition.” would elect the most appropriate person understanding of the value of chartered
from within the board to be chair. So membership of the IoD.
The move was not popular in all quarters that is one of the positives from that
of the game. Cricket arouses great experience. It was obviously quite a “It would be nice to think that a chartered
passions in people and the mood of demanding role balancing the interests member process is better recognised and
nations can ride on the outcome of a of the various countries, dealing with the accepted. And a little plus would be if it
match. This put significant pressure imbalance of power amongst the member was mandated that a certain percentage
on ICC members and added complexity countries and the different cultures. It of each board had to be made up of
to his role as president, Isaac says. was very demanding both physically people who are chartered members.”
and intellectually.”
“I chaired a board of 13 people. Each of “I’d like to think that a greater proportion
those 13 people had a vote, and I didn’t. of listed company directors, and Deloitte
In some ways I was more like a mediator. top 200 organisations, were members
of the Institute. That would be a measure
“We were heavily criticised [for the that we had succeeded, that we were
10-team World Cup format] because relevant to people who have governance
we were denying some countries the as their career.”
opportunity to participate – but it was
of course a qualifying tournament so
every country had the chance to qualify.
8 Aug/Sep 2019 BOARDROOMFEATURE
BROADER RESPONSIBILITY
Directors today face an increasingly
complex environment in which their
decisions face more scrutiny than
ever before, Isaac says.
“One of the biggest challenges in
governance at the moment is the
tendency for regulators, for lawmakers,
to want to increase the responsibilities
of directors and, arguably, hold them
personally responsible. There appears to
be an attitude that directors must take
personal responsibility for everything
that happens,” he says
“That’s just not realistic in big organisations.
Apart from anything else, it arguably
confuses the line between management
and governance.
“I think being clear about what the
directors are responsible for – what they
can, in practical terms, influence and
take responsibility for – is going to be
important in the next little while.”
The traditional responsibility of directors “One of the biggest challenges in governance
to put their organisations first remains at the moment is the tendency for regulators,
the priority, he says, but be mindful that
in today’s environment that may include
for lawmakers, to want to increase the
more than simply aiming for a profit. responsibilities of directors and, arguably,
“Your obligations as a director are
determined by the Companies Act, the
hold them personally responsible. ”
trust deed, or whatever the governing
document is. Primarily you have an
obligation to the organisation, for it to “There is an acceptance that companies
meet its objectives. If it’s a commercial generally, and therefore boards, have got
organisation that tends to be about a growing responsibility to a wider group
sustainable profits and good growth. of stakeholders and I think most boards
that I am involved with take that obligation
“At the end of the day, in these sorts on board and are looking at what they do
of environments, you are elected by around sustainability, and so forth.”
the shareholders and if the company
doesn’t succeed profitably, you won’t
get reappointed. In terms of the not-for-
profit roles I have had, particularly with
sporting associations, it can be more
difficult to judge whether or not you
were successful.
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GOVERNANCE LEADERSHIP CENTRE
AND SELWYN EATHORNE, SENIOR personal liability has its place. There is introducing a accountability regime
GOVERNANCE ADVISOR no shortage of statutes in New Zealand for financial institutions (with personal
imposing obligations on directors, liability for directors) and this is also
accompanied by civil or criminal liability. considered in the second phase of the
The increasing trend of laws and However, in the past 12 months we have Reserve Bank Act review.
regulations extending directors’ seen numerous director accountability
personal liability is deeply concerning. proposals/reforms including: In the past, the IoD has supported
We are seeing this across different reform where directors could be civilly
regimes on a piecemeal basis. the introduction of civil and criminal or criminally liable in appropriate
liability for the decision-makers of circumstances (eg under the Health and
cartels (effective April 2021) Safety at Work Act 2015). However, care is
needed to ensure that honest and diligent
the Credit Contracts Legislation directors are not unfairly prejudiced.
Amendment Bill introduces a due
diligence duty on directors and There are, of course, complexities for
officers, and personal liability policymakers in allocating accountability
and liability between a company, directors,
the Government has signalled that officers and other corporate stakeholders.
it will make directors personally liable However, we need to take a long-term
for company PAYE and GST debt approach with policy rather than a knee-
(a recommendation of the Tax jerk reaction to high-profile examples
Working Group) of substandard governance.
11 Aug/Sep 2019 BOARDROOMFEATURE
COHERENT REGULATORY Superannuation and Financial Services should properly lie between directors and
APPROACH REQUIRED Industry (2019): “Boards cannot, and management before making such a shift.
must not, involve themselves in the day-
A piecemeal approach by policymakers to-day management of the corporation RISK: COMPLIANCE AND RISK
to imposing liability is worrying and risks … The task of the board is overall ADVERSE BOARDS
tipping the scales too far, prejudicing superintendence of the company, not
directors. If left unchecked this approach its day-to-day management.” It is critical Balancing the time spent on conformance,
could result in significant and adverse that this separation is maintained. performance and strategy is an ongoing
effects on governance and ultimately challenge for directors.
impact on New Zealand’s prosperity RISK: LIABILITY CHILL DETERRING
and wellbeing. DIRECTORS The increase in director responsibility
and liability adds to a board’s growing
New Zealand needs skilled and experienced The increasing responsibilities and regulatory burden, meaning they may
leaders. It needs leaders willing to take on liabilities on directors can have a spend disproportionally more time on
the responsibility of guiding organisations, cumulative impact on directors and compliance. In our 2018 Director Sentiment
and making challenging choices and organisations. There is a very real Survey 71% of directors reported spending
decisions that will result in a strong likelihood that increased responsibilities more time on compliance-related activities
and sustainable future. and personal liability will be a significant in the past 12 months.
deterrent to directors and potential
The impact of good governance is far directors seeking board roles (especially Boards have a fundamental role in
reaching with the potential to provide in relation to listed issuers or financial setting, driving and overseeing strategy
benefit to shareholders, customers, institutions). to promote the long-term success and
organisations, employees and communities. sustainability of their organisations. This
Directors have the choice to contribute includes taking appropriate risks to drive
Any proposal to impose director personal to New Zealand in a range of ways, and performance. Managing risk is already
liability deserves careful, and considerable, we are already seeing signs that some challenging in a world of dynamic change
attention from policymakers. There has directors favour serving on the boards and disruption and increased personal
to be a holistic and system-wide view of private companies with a relatively liability exacerbates this.
that takes into account existing director low risk profile.
liability, and balances this with the need The danger with undue risk aversion is that
for, and importance of, non-executive In our 2018 Director Sentiment Survey, boards can miss opportunities and avoid
directors and good governance. one in three directors (33%) said that the innovation, failing to realise the potential
scope of director responsibilities was for their organisations. It’s important to
It is vital that there is more dialogue more likely to deter them from taking understand the broader implications and
between policymakers and other relevant on governance roles. In an increasingly potential negative effect on organisational
stakeholders. The IoD sees this as a complex operating environment for performance when proposing greater
priority and will continue to engage, and organisations, it is now more critical than liability for directors.
to strongly oppose proposals that place ever that boards are able to attract well-
a disproportionate burden on directors. qualified, experienced directors to lead RISK: COSTS AND D&O
New Zealand organisations for sustainable INSURANCE
We have raised some key concerns success, and to build trust and confidence
about increasing director responsibilities in business. The greater the regulation, the greater
in recent submissions on policy and the increase in compliance costs for
legislative initiatives. RISK: PERSONAL REPUTATION organisations, directors and consumers.
Some of the proposed reforms will require
RISK: MERGING ROLES AND Being a director can carry a high level extensive due diligence processes,
RESPONSIBILITIES OF THE BOARD of reputational risk. There have been procedures, and policies and training.
AND MANAGEMENT a number of examples in New Zealand The cost should not be underestimated,
and Australia in the past 12 months especially for large organisations.
Some proposed duties on directors/ where directors have faced significant
boards merge the role of the board public scrutiny when things have gone The cost of Directors and Officers
and management, undermining the wrong in their organisations. insurance, generally, has risen markedly
essence of corporate governance in in recent years and is prohibitive for
New Zealand. A core role of boards is Personal reputation is front of mind for some organisations. Premiums for some
to hold management to account through directors and is already a strong driver organisations have more than doubled
effective and independent oversight of for them to ensure their organisations in 2019 and these costs will ultimately
performance and compliance matters. are well governed. Extending the personal reduce shareholder returns.
This was reinforced in the Final Report regulatory responsibility of directors
of the Australian Royal Commission extends the risk to their reputations.
into Misconduct in the Banking, It is prudent to ask where responsibility
12 Aug/Sep 2019 BOARDROOMThe power Brand is a tricky word, misunderstood,
regarded as fluffy sometimes. But a strong
of good
brand has the power to create connection,
change, and capture people’s affection
and trust.
governance
For a business and its stakeholders,
a brand is an experience that is far
more important than a transaction.
Entrepreneur and blogger Seth Godin,
when talking about brand, says that
people do not buy goods and services
To inspire future generations to step up they buy “relations, stories and magic”.
to governance roles, we need to create
Without that sense of “stories and magic”,
inspiration and shared understanding
for what good governance can achieve. people can quickly become disengaged
with a brand, and lost as customers.
Brands also touch an organisation’s
business partners, its shareholders and,
in the modern world of concern about
social licence to operate, a disparate
collection of stakeholders that may
include the general public, regulators
or governments.
Aug/Sep 2019FEATURE
AUTHENTICITY, TRUST AND of the business landscape. In a volatile As we go forward, we want to involve
AFFECTION world, governance will become more our members and the governance
important and more challenging than ever community in telling stories – to inspire
Apple tops the Forbes list of the world’s before. While we may need to think about future generations and to create a better
most valuable brands. Apple is an example what the future of governance looks like – understanding of why people take on
of a brand that is more than a consumer it will undoubtedly remain essential. governance roles and what they hope
choice, it is a lifestyle choice. It connects to achieve.
with people on an emotional level and on From September, you will see the gradual
an aesthetic level. Its customers trust that rollout of a new look for the IoD – and Our new website will be completed later
its products will look good, feel good and we will start to really focus on how to this year and will showcase many faces
work well. Apple is regarded as authentic. position the importance of governance of directors, real people, getting real
to our nation for the future. There are results for organisations and communities.
Trust is an emotional connection that many stories to share about the power Some of our members (pictured) have
we build through experience and and outcomes that good governance kindly agreed to be our first “brand
relationships over time. It brings people unleashes. Showing how it contributes ambassadors.” We will share many more
to you, but also allows them to forgive to fair, just and sustainable organisations, stories and faces of good governance.
you when things go wrong. communities and countries is essential.
This emotional aspect of brand (nobody “We believe that good governance
claims that all Apple products are better, has the power to transform the future,” Barbara Chapman
or certainly not cheaper, than those of says Kirsten (KP) Patterson, IoD CNZM CMInstD
their rivals) is important for understanding chief executive.
what Godin’s “stories and magic” means in
practice. Apple’s authenticity and trust are “The IoD will continue to have its eye on
a means of beating the (less expensive) local and global issues, and to champion
competition through connection and best-practice governance, but our brand Caren Rangi
a sense of love. will take a big step forward in claiming ONZM MInstD
more of our New Zealand spirit.”
When Mercury Energy won the TVNZ-
NZ Marketing Awards Supreme Award in An example of what this means visually
2017,its “energy made wonderful” rebrand is the cover image on this issue of
was credited with stabilising Mercury’s Boardroom - a striking aerial shot of David Pilkington
customer churn and establishing it as Waiwera, North Auckland that allows CFInstD
a key player in the electricity market. us to celebrate not just the beauty of
our country but also shows how the big
Joan Withers CFInstD was the chair picture or perspective can help us see
of Mercury at the time. In the foreward things differently.
to Why aren’t we doing this? a book on Kirikaiahi Mahutariki
brand, she writes: “A strong brand makes “While looking more contemporary feels MInstD
every business challenge, and every right, it was important to take a moment See five questions with Kiri
conversation, easier.” to think about why we are here for our on page 24.
members and the governance community
She says Mercury’s rebrand lifted staff and what we are helping them to achieve,”
both engagement and stakeholder Patterson says. Suneil Connor
confidence. “It can be argued that MInstD
a strong brand is more useful than “Our members are at the heart of what
it’s ever been.” we do. The IoD is culturally rich because
of our heritage and strong because of the
THE POWER OF GOOD strength of our members. What gets us
GOVERNANCE up every day is supporting directors who Tony Allison
are making decisions that can positively CMInstD
What is the brand of governance? As change and transform the future of
the IoD celebrates its 30th anniversary, New Zealand. Today, more than ever,
we have been doing a lot of thinking New Zealand needs directors who go
about how to ensure that governance beyond compliance and aspire to meet
as a profession remains, or indeed is the highest standards. Our goal is to show
understood, as a trusted and vital part the powerful results – big and small.”
14 Aug/Sep 2019 BOARDROOMFEATURE
Migrant
exploitation
AUTHOR
SARAH BADDELEY MINSTD, The Labour Inspectorate is taking
a tactical approach with prosecutions,
CONSULTING MANAGER AT
MARTINJENKINS
signalling to New Zealand companies
a responsibility to ensure workers
in their supply chain aren’t
being exploited.
T he case of migrant worker
exploitation involving the popular
Te Mata Estate is another example
of how our regulator here, the Labour
Inspectorate, is clearly not afraid to
NEW ZEALAND REGULATOR
TAKES FORTHRIGHT APPROACH
Major New Zealand companies have so
far been largely immune to the effects
take both legal and moral action against of brand retaliation against the use of
major New Zealand brands. The case exploited labour in supply chains. We’ve
involved a labour supply contracting yet to see consumer reaction to poor
firm’s exploitation of 12 Papua New Guinea treatment of workers on the scale seen
citizens working at Te Mata’s vineyards in Europe.
in Hawke’s Bay, with the contracting firm
being hit with $30,000 in penalties. But our government institutions are
taking the issue seriously. The Labour
Although the winery wasn’t itself before Inspectorate is increasingly calling on
the courts, the Labour Inspectorate had no major New Zealand businesses to take
qualms about pointing out that the beloved a responsible supply-chain approach.
wine producer had a moral responsibility Its reaction to the recent independent
for those working in its vineyards. review of Chorus’s next generation
network supply chain was that the report
It’s a warning that successful brands face should be read by all company directors
a real reputational risk here. and CEOs.
Across the Tasman, the franchised The government is also putting its money
convenience store 7-Eleven has since 2015 where its mouth is. Its new Supplier Code
been facing a sustained branding and of Conduct requires anyone wanting
financial disaster following revelations of a share of the $41b annual spend to
terrible treatment of workers at its stores show not only that they comply with
– some getting as little as 47 cents an New Zealand standards for their
hour. The fallout from this case included own employees, but also that they
a new government Migrant Workers “monitor and address” compliance with
Taskforce being set up in late 2016, as well international human rights standards
as calls for labour standards breaches to within their supply chain.
be subject to criminal penalties.
15 Aug/Sep 2019 BOARDROOMFEATURE
“In the wine industry, standards developed by
Sustainable Winegrowing New Zealand are an
attempt to go beyond the legal compliance defence
and give confidence to consumers.”
16 BOARDROOMFEATURE
CHORUS OF DISAPPROVAL We’ve found that it helps to consider four different layers of
risk when you’re looking at your supply chain arrangements
Chorus commissioned a review of breaches of labour laws among These are:
subcontractors working on its ultra-fast broadband (UFB) rollout.
This was in response to allegations from the Labour Inspectorate. workers’ personal situations
legal and institutional frameworks
The Labour Inspectorate found identified issues with 76
subcontractors out of 365 working in the UFB connection risks created by employers
side of the business – around one in five. These were third-tier
contractors, contracted to a service company. The review noted risks relating to the particular workplace.
subcontractors doing unpaid work, poor employment record
keeping, underpayment, cash-back arrangements whereby RISK FRAMEWORK
employees had to return money to their employer, and bribery.
Martin Jenkins and Associates (adapted from the European
While some subcontracting companies face legal action, and Union Agency for Fundamental Rights).
others have been blacklisted by Chorus, the company itself is
not legally liable under New Zealand employment law due to
RISK FACTORS EXAMPLES
the indirect nature of the employment relationship.
Relating to workers’ personal Relatively better than home country,
Chorus has moved this year to implement a Supplier Code situations barriers to accessing remedies.
of Practice for its service companies and to review its risk
governance framework. Relating to legal and Immigration policy, visa requirements,
institutional frameworks labour and employment policy, health
UNDERSTANDING YOUR SUPPLY CHAIN RISKS and safety “person conducting a
business or undertaking”, modern
slavery, legislation in overseas
There are very few international examples of good practice that jurisdictions, international United
are directly relevant to New Zealand. Major brands like Adidas Nations and International Labour
have taken steps to ensure their transnational production Organization conventions.
facilities meet local labour standards, but there are few overseas
examples of companies operating here who are front-footing Created by employers Business models (eg, sub-contracting
this with the sophistication that the local regulator is calling for. and piece rate), worker engagement
and power balance differences.
Supply chain risk is an established area of corporate risk The workplace Geographical isolation, travel time,
management practice – yet there is little indication that lines of accountability, seasonality,
New Zealand companies are heeding the Labour Inspectorate’s environmental conditions and
calls and turning their minds to labour risk in their supply chain. uncertainty.
And who can blame them? Understanding how to detect and
prevent migrant exploitation in your supply chain can be very This model emphasises that to manage risk you need a good
complex. At a minimum it requires an understanding of the understanding of the workers in your supply chain, their specific
practical operating impact of a complex set of legal obligations, contractual arrangements, and the kinds of exploitation risks
including the Immigration Act, the Employment Relations Act, they may face.
the Minimum Wage Act, the Wages Protection Act, and the
Holidays Act. But that is not enough. Taking a good long look at these labour issues can be a real
education for any executive or director coming from a position
ADDRESSING FOUR LAYERS OF RISK of privilege.
At MartinJenkins, our recent work with New Zealand companies Common forms of exploitation stretch beyond Minimum
on this issue has highlighted for us the importance of not Wage Act breaches to include volunteerism, cashback scams,
relying on traditional assurance methods. and exploitative arrangements around housing, transport
and food. Running two sets of books is also not uncommon
for unscrupulous suppliers – exploiting people who may be
desperate, vulnerable and out of their depth.
17 Aug/Sep 2019 BOARDROOMFEATURE
At its heart, exploitation stems from a power imbalance. The The direction of travel from the regulator is clear. Under-
capacity of migrants to speak up against poor treatment is resourced for the scale of the current task, the Labour
constrained by fear of losing their job and therefore potentially Inspectorate is increasingly taking a tactical approach with
their visa. It’s an understandable fear, but it’s not always a its prosecutions, sending signals to New Zealand companies
well-informed or legitimate one. Immigration NZ and the Labour that they have a responsibility to ensure migrant workers in
Inspectorate – both of them parts of the Ministry of Business, their supply chain aren’t being exploited.
Innovation and Employment – are co-located regulators who
work together to protect the interests of those workers in Woody Guthrie once sang an ode to the American migrant
these situations. workers who headed west out of the US Dust Bowl in the
1930s to work in orchards, vineyards and fields – the ones
RIGHT HERE, RIGHT NOW who “dig the beets from your ground, cut the grapes from
your vine, to set on your table your light sparkling wine”.
While many companies are busy talking about the Future of
Work, migrant exploitation is a workforce issue that’s right Whether they’re cutting grapes or digging trenches, all the
here, right now. people who are involved in keeping New Zealand’s economic
wheels turning deserve a serious response from our business
Some New Zealand businesses are responding – for example community to the problem of supply chain exploitation.
some of our high-end fashion labels have been promoting
ethical standards in the garment industry.
As the Australian 7-Eleven saga shows, the reputational damage
to businesses around this issue can be immense. But flipping
the coin, there’s potentially also a competitive advantage
for firms that can show they take their moral responsibilities
seriously rather than simply hiding behind clauses in contracts.
18 Aug/Sep 2019 BOARDROOMShaping
AUTHOR
AARON WATSON
culture through
questions
19 Aug/Sep 2019 BOARDROOMFEATURE
Asking a question about organisational culture
elicits more than answers – it brings the subject
of the question into the light.
P hilip Carden says managers can
improve organisational culture by
asking questions. And acknowledging
that the answers matter.
“You need to avoid regular feedback
that is about leadership quality – you
are not going to ask about people –
but you can ask more specifically about
their experience at work.”
“In those cases you have real issues of
psychological safety and in those cases
it is not always reasonable to have that
feedback visible to people’s direct leaders.
They [the direct leaders] might be the
The former head of the consulting ones that are involved.”
engineering team at Bell Labs is not That could be questions about role clarity,
talking about culture surveys and clarity of objectives, whether they have Carden advocates giving control of
measurement in the traditional sense. the tools to do their job, their sense of feedback on serious misconduct issues
He wants businesses to have regular, fairness and inclusion, or whether they to employees.
tracked and open (not anonymous) feel they are recognised fairly.
conversations about life in the workplace. “Let them have control over how their
“In terms of wellbeing, it could be if they feedback is handled, who it goes to.
With his brother Mike, he has founded know where to find support, whether We call that directed feedback. You
Joyous, a company that offers an they have a reasonable work-life balance. choose who that feedback goes to.”
innovative approach to measuring culture,
improving staff wellbeing in the workplace “These are all things that people leaders Depending on the systems in the
and managing the risk of misconduct. have influence over – so if there is organisation, that might be the chief
negative feedback in those areas, there executive or even someone on the
It’s a software product based around is something they can do about it.” board, he says.
regular question-and-answer sessions –
conducted digitally – in which staff and One of the interesting things about By making feedback
managers express candid views on a topic implementing an open feedback system
of the moment. It also allows staff to chat is that questions designed to measure a regular habit, rather
about the things that are impacting them
at work and for managers to respond.
culture start to shape how people think
and act, he says. In essence, the questions
than an annual event,
themselves become a management tool. Joyous aims to make
By making feedback a regular habit, rather
than an annual event, Joyous aims to make “If you are asking questions about a organisational culture
organisational culture more transparent,
easier to monitor, and to enable leaders
particular topic, it reminds people leaders
that the area is important and triggers
more transparent,
to respond to issues in a timely manner. them to think about it. It happens on easier to monitor, and
With staff the ultimate beneficiaries as multiple levels. The culture shaping power
workplace culture improves. of questions… people often think they to enable leaders to
are just targeted at staff.” respond to issues in a
CULTURE AND CONDUCT
TRANSPARENCY CAN’T FIX timely manner.
“You are trying to improve the state of the EVERYTHING
organisation – in terms of both culture and
conduct - over time,” Carden says. Leadership quality is outside the scope
of the Joyous model. It’s not something
What differentiates his idea from many people leaders can address on behalf of
traditional culture and conduct monitoring their teams and not a suitable topic for
mechanisms is that Joyous assumes all open conversation. Organisations will
feedback is open and transparent. This need another – and probably anonymous –
has implications for the type of feedback system for dealing with issues in that area.
the approach is suitable for.
Serious misconduct is also unlikely to
be a suitable topic. This could include
harassment, bullying, misconduct
or corruption.
20 Aug/Sep 2019 BOARDROOMFEATURE
Joyous’s software solution works directly on people’s
mobiles, tablets or computers – meaning staff in the field
can contribute just as easily as staff in the office.
INCLUSION AND EQUAL WEIGHT
One of the great advantages of the Joyous
system is that it can be rolled out across
distributed workforces, or shift-based
environments where staff may not always
be overseen by the same manager.
Joyous’s software solution works directly
on people’s mobiles, tablets or computers
– meaning staff in the field can contribute
just as easily as staff in the office. Including
all staff in the conversation is the goal, “so
your voice is not louder because you work
at head office and have conversations
around the water cooler,” Carden says.
The system can even be extended to
subcontractors – something that may
have alerted the Chorus board to
irregularities in its contract workforce
sooner (see “Migrant exploitation”,
page 16).
“At a governance level, you are increasingly
seeing expectations of suppliers that
cross subcontractor boundaries. If you
think about that as a governance issue,
how do you include subcontractors in your
feedback loop? How do systems manage MENTAL HEALTH AND “Workload and work life balance: that’s
to cross organisational boundaries? WELLBEING where you are really getting into stress
that is a function of having too much work
“Part of what gets in the way of including One of the challenges with wellbeing, to do relative to the number of hours in
subcontractors in your feedback loop are Carden says, is it can be quite a vague the day.”
the operational complexities of getting concept to people leaders in an
people set up within large organisations. organisation. SEEING INTO YOUR
But technology has got to point where it is ORGANISATION
relatively simple to do that in a secure way. “So you have to make it more digestible.
We put a lot of focus on the fact that there We focus primarily on the parts of mental In a typical organisation, your manager
is no set up for anybody – no password, no health and wellbeing that are affected by would see your feedback and then their
app on your phone. The act of answering work. You can divide that up into areas manager and on up the hierarchy.
a message takes care of the security that are much more straightforward for
credentials and launches the web app. people leaders to understand. “The most important thing is that people
This is the modern way of doing message- leaders respond to feedback. There
initiated feedback. The result is the ability “Support: whether people have access is a tendency to respond to negative
to “include the broad set of people that to support. Is there someone who cares feedback, but it’s important to respond
are involved in your company’s conduct”, about them and do they know where to to all feedback.”
Carden says. go if they have a problem.
Having an ongoing culture conversation
“Security: both physical safety and mental captures data which can then be assessed
security – feeling physically safe but also to compare differences between teams
confident about your future. or locations, or to uncover areas of a
21 Aug/Sep 2019 BOARDROOMFEATURE
business which a leading or lagging in
one cultural aspect or another.
“By starting conversations with a regular cadence
around these important topics, and by enabling
The system will generate dashboards, people leaders to respond to them, you move from an
heatmaps or other forms of analytics
and it is possible to drill all the way down emphasis on measurement to an emphasis on action
to an original response when seeming
more information on a particular finding –
directly from a board report, if that
and continuous improvement. ”
is warranted.
“If you are using modern software the
filters can be applied to the data. It
becomes very easy to navigate through
a lot of feedback.”
But it is the process of asking and
answering questions that has the most
immediate inpact on culture, he says.
“Where technology is today, you have the
ability to actually impact both culture and
conduct with every interaction.”
22 Aug/Sep 2019 BOARDROOM5
FEATURE
Five
Questions
1. TELL US A LITTLE BIT
ABOUT YOURSELF
I am from Maketu in the Bay of Plenty
and am of Te Arawa, Mataatua, Tongareva
Five questions with… (Kuki Airani – Cook Islands) and
Tahitian descent.
Kirikaiahi Taiiti Mahutariki MInstD I have over 20 years of commercial
an IoD Future Director on the experience in the private sector. I am
a lawyer by background and have worked
board of ServiceIQ. at PricewaterhouseCoopers in tax, Kahui
Legal practicing law and am now working
in the banking and finance industry at ASB
Bank in the Māori Financial Solutions team.
I am a founding member and alumni of
the Advancement of Māori Opportunity,
a values-based leadership programme.
23 Aug/Sep 2019 BOARDROOMYou can also read
