Magazine article New Zealand Management

COVER STORY: Where the Long White Cloud Meets the Maple Leaf Governance in New Zealand and Canada

Magazine article New Zealand Management

COVER STORY: Where the Long White Cloud Meets the Maple Leaf Governance in New Zealand and Canada

Article excerpt

Byline: Jens Mueller, Sandy Maier

Now in its fourth year, the annual C[pounds sterling]Directions Co Understanding GovernanceC[yen] survey shows solid trends in governance development in New Zealand. Looking also at the same survey data from Canada, to pick a country similar in its corporate and legal structures, we see a lot of similarity in the approach to governance, the needs of firms and how shareholders, managers and directors plan their way forward.

Sponsored by universities in both countries, as well as several large organisations with an interest in governance in New Zealand, such as PWC, ANZ/National, Simpson Grierson, Swann Group, 3media Group, and several government agencies, this survey reaches deep into the fabric of corporate entities in both countries, with about 60 percent of responses in both countries from privately held and family-owned firms. This means a large number of the responses are from the firms that make up the bulk of GDP in both countries and thus report from deep inside the engine room of economies in New Zealand and Canada. The survey operated over 120 days and captures the downtrends in world economic activity and how it affects the top-level management of firms. With more than 5000 responses in New Zealand over the past three years, this is the largest non-governmental governance survey in this country.

While 73 percent of firms in both countries report strong in-country competition, Canadian firms report a 50 percent greater concern over strong international competition than their New Zealand counterparts. This likely means that firms in Canada, operating in close proximity to their rivals in the United States, see stronger head-to-head competition in their main overseas market.

We are encouraged by the level of similarity in key governance areas between firms in both countries, showing that New Zealand firms are performing quite similarly to firms in Canada. About 45 percent of directors in firms are independent directors (this number has steadily increased in New Zealand over the past few years), in less than 60 percent of the firms the CEO is also a director, and in about 70 percent of all new director appointments, those new directors were sourced from management or existing directors.

We see that New Zealand shareholders and directors face similar issues to their Canadian colleagues: How to increase the number of independent directors and where to source those candidates. While New Zealand has director/firm matching websites, such as Canadian shareholders and directors are left with recruiting exclusively through their network of friends, with fewer than seven percent of past director appointments having involved a professional search firm. This identifies a practical limitation of where to find directors once a firm has decided to add independent directors. Clearly, finding candidates from the limited circle of friends would exclude suitable directors who might live one valley away and a few minutes drive over the hills.

Once an opening exists on a board, what makes a Canadian or Kiwi business person consider an appointment as a company director? In both countries the main driver is the ability to C[pounds sterling]do some goodC[yen], with more than 70 percent of respondents ranking this feature as C[pounds sterling]very importantC[yen]. The C[pounds sterling]reputation of other directorsC[yen] follows in importance in both countries, and while New Zealand director candidates are also concerned about their C[pounds sterling]personal level of riskC[yen] (66 percent), that issue is much less relevant in Canada (46 percent), where the directors are better protected from personal liability arising from directorships.

As in prior years, and supported by the data from Canada, directors report their competence levels highest for C[pounds sterling]commitmentC[yen] (about 50 percent in both countries), while they report significantly lower levels of C[pounds sterling]excellent competenceC[yen] in other areas:

Co corporate strategy 11 percent New Zealand/23 percent Canada;

Co corporate governance 19 percent/26 percent;

Co leadership 17 percent/19 percent;

Co sustainability 35 percent/38 percent;

Co team player 22 percent/15 percent and

Co ability to manage dissent 15 percent/15 percent. …

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