One man, 97 jobs, no problem

Keith Smith

One of New Zealand's top company directors, Keith Smith, is on 97 boards, including four listed companies.

Smith's busy boardroom life illustrates a question of the modern business world - as directors' responsibilities increase, should people face limits on the number of boards they can join?

Some shareholders' advocates say yes, but top directors approached by the Business Herald see no reason for restrictions.

Smith is chairman of listed companies The Warehouse, Tourism Holdings, Skellmax Industries and Wrightson.

He does not think rules limiting directorships are necessary.

An individual's ability, experience and time management are the key factors, he says.

He said 40 people had conducted five performance reviews on him as a director over the past 15 months.

"If any director is not performing or supposedly does not have sufficient time, his fellow directors are not going to stand for it because their reputations are on the line as well."

Smith is also deputy chairman of Genesis Power, and chairman of accounting firm BDO Spicers.

Smith points out that of many of his 97 directorships are subsidiaries, including about 20 associated with The Warehouse.

Other are of private companies that meet only quarterly.

Geographically his directorships range from Fullers Bay of Islands to Fiordland Cruises.

Company names range from Ultimate Lady to Mobile Surgical Services.

"I'm a professional director. I do nothing else," Smith says.

"I'm busy, but really no busier than some of the managing directors that work for me.

"It's a job for me. I'm 53, I don't want to go to pasture yet."

Smith says he turns down a lot of work.

When he is asked to be a director of a company he checks to see whether his skills would add value and whether he has the time.

"To just say 'you, Keith Smith, should just have four or five directorships' is totally wrong, because it comes back to the individual."

Roderick Deane is a former chairman of the State Services Commission and was deputy governor of the Reserve Bank when the dollar was floated in 1985.

Today, he is one of New Zealand's most influential businessmen.

He is chairman of three of the country's biggest companies - Telecom, Fletcher Building and ANZ National Bank - and a director of ANZ and Woolworths in Australia.

Deane bemoans what he sees as a huge increase in directors' work loads in areas that are "distracting" rather than improving a company's productivity.

This is partly due to a greater focus on corporate governance in the post-Enron world.

But Deane also refers to changes imposed by the Government, which he, as a powerful figure in the economic liberalisation of the 1980s and early 1990s, sees as politically rather than economically driven.

Deane cities new stock exchange rules, a beefed-up Securities Commission and changes to the Commerce Act, Securities Act, Companies Act, takeovers provisions, industry regulation - notably in banking - and increased regulation of labour markets.

"They are a disconcertingly significant distraction for directors and management in terms of getting on with the job operationally, actually working on your company strategy, getting your operations in good order, attending to your customers' needs, making money and getting on with your investment programmes," he says.

"I think the responsibilities of directors have unquestionably increased.

"But sadly they've increased in ways that aren't necessarily productivity enhancing."

The many new regulations can lead to directors spending more time on the job.

But Deane, whose directorships are a full-time job, says it is more a case of devoting more time to governance and compliance issues than operations, strategy and growth.

Despite increased demands on directors - which have been cited as reasons for pay rises - Deane strongly opposes the the Australian Shareholders' Association call for no one to hold more than five equivalent directorships in listed companies.

The association counts a chairman's role as three directorships, based on the usual relativity of fees and time commitment.

"I think that's a rather juvenile way of looking at the issue," Deane says.

"Boards have to make a judgment call on whether the individual directors are devoting enough time to each company."

Directors of companies Deane chairs do not take other jobs without consulting him. They discuss how onerous and time-consuming the role might be.

"If I had a director on any board who wasn't spending sufficient time, I would address it with them," he says. "I don't think it's a matter for regulators to decide."

Catherine Savage, the managing director of AMP Capital Investors, says a comparison of Telecom's 1999 and 2004 annual reports shows the extra burden of corporate governance requirements.

This year's report has 18 pages devoted to governance compared to two in 1999.

Savage also says imposing a limit on the directorships a person could hold would be wrong.

She believes the issue should be decided case by case after independent annual reviews of directors' performances.

Examining directors' board meeting attendance records gives an indication of whether their time is stretched.

"It is unlikely that we would oppose a board nomination on the basis of workload unless the nominee had a poor attendance record in other directorships," Savage says.

New Zealand Shareholders' Association board member Des Hunt says one chairmanship and four other directorships is about right.

But he acknowledged many factors must be considered.

Directors of smaller companies would have a greater work load than their counterparts at big companies because fewer, if any, specialists would be employed to help them and their actions might not be insured.

And companies with new projects or acquisitions in the pipeline, or looking to appoint a new chief executive, would demand more of their directors' time. 

Lloyd Morrison, a director of Infratil, NZX, Port of Tauranga and TrustPower, says demands on directors have increased over the past couple of years.

"That's a good thing because it moves from being a token role to being a proper role," says Morrison.

He reckons there is more to being a company director than being a corporate governance "policeman".

People invest in companies to make a return and that is as much the responsibility of directors as management, he believes.

"I don't think that shareholders are going to be happy if there's great governance and lousy performance and there hasn't been enough focus on that."

Generalist directors should be on fewer boards than people with industry specific experience, Morrison says.

He suggests guidelines could be set by the Securities Commission, the Institute of Directors or NZX rather than having rules on the number of directorships a person can hold.

Boards looking to appoint a new member would take such guidelines into account.

Nicki Crauford, chief executive of the Institute of Directors, agrees that guidelines would be better than regulation.

She suggests that if the number of directorships a person could hold were limited, people would be most likely to drop directorships they held in good cause and non-profit organisations - not the effect that anyone would want.