Magazine article New Zealand Management

Governing Is Not Easy; It Is, to Paraphrase Kermit the Frog, Not Easy Being a Director. Ron Scott, Author of the Recently Published Book, the New Director, Explains Why

Magazine article New Zealand Management

Governing Is Not Easy; It Is, to Paraphrase Kermit the Frog, Not Easy Being a Director. Ron Scott, Author of the Recently Published Book, the New Director, Explains Why

Article excerpt

Byline: Ron Scott

Directors fees increased by 4.9 percent in the past 12 months according to a recent survey by Strategic Pay. The main reason is that directors face risks. The Companies Act 1993 sets out the responsibilities of a company director. Whether one is a director of a one man band or of the largest listed company in New Zealand, the legal responsibilities are the same.

Every director must ensure that he or she complies with the Companies Act, the Tax Administration Act, the Income Tax Act, the Goods and Services Tax Act, the Financial Reporting Act, the Resources Management Act, the Health and Safety in Employment Act and the Commerce Act.

Many don't of course. Running corporate governance programmes is, in part, what I do. In my experience it is a rare day when everyone in the room is aware that they need to know the location of their share register or that they need to have the minutes of all board meetings for the last seven years handy.

The maximum fine for not knowing these things is $10,000.

Few directors of smaller entities sign a certificate every time they pay themselves certifying that the company will still be solvent after the payment. That attracts a $5000 fine.

Most of the time these things don't matter -- so long as things are going well no one asks questions.

But times are now tough and enterprises fall over.

Liquidators then look for a return to the shareholders and creditors and recently redundant employees may want to "get their own back".

Customers, on the other hand, would prefer not to pay their bills.

Suddenly you need to know that you and the other directors have done the job and lived by the rules. You must rely on your fellow directors. Are they to be trusted to hang together like the Feltex Five or, will the team break up as in the Five Star Group? In that case two of the four directors pleaded guilty to offences and have been sentenced to imprisonment. The others are trying to prove innocence through the courts.

It is little wonder that people talk about the Old Boys Network. Is there one? Of course!

You need to trust the person sitting next to you.

Decisions made around the board room table are joint decisions. Even if you are outvoted by your fellow directors you are jointly responsible. If you don't trust them to make good decisions then you are at risk of serious nervous health issues. …

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