In the second of a monthly series on corporate governance, Joan Withers talks to Tony Carter about governance from both sides - senior director and executive.
Q: Do you think directors coming into governance really understand the risks involved?
I think most directors would, but there are some who wouldn't. I suspect there is a group who believe that those risks can't happen to them.
Q: In the push to get a greater percentage of women on boards, do you think talented men are being overlooked or disadvantaged in director recruitment or chair selection processes?
I think there is a small risk of male disadvantage but it is outweighed by the benefits a truly diverse board will bring.
Q: How, as chair, do you build and maintain a relationship with the chief executive?
It has to be based on mutual respect and trust. If you can't trust the chief executive or they don't trust the chair, then something has to change.
Q: What do you think the board's role is in a crisis situation?
In some ways to keep out of the way and let management do what they need to do. Management have enough to do without devoting a lot of their time to managing the board. But clearly, the chair has to stay close to the crisis to support and mentor the CEO and then the chair needs to keep the board informed.
Q: How did you adjust when you transitioned from being a chief executive into governance? How do you as chair ensure that the board doesn't cross into areas that are management's responsibility?
I came from a co-operative background as a chief exec so I understood where a lot of the divide is between management and governance. I found the transition relatively easy and certainly can understand management's perspective and have never been tempted to try and do their job for them.
Q: How do you feel about director remuneration in New Zealand, especially compared to Australia?
Clearly, director fees are significantly lower than in Australia. I do think they need to increase to attract the best people into governance and to fairly reward directors for the work they do.
Q: Apart from specific skills and experience, what other attributes do you look for when appointing a director to a board you chair?
It will vary depending on what you are looking for in a particular appointment. For any vacancy, I always start with the skills and experience an ideal board would have and then recruit against the gaps between the current board and the ideal board.
Q: How do you feel about board performance reviews? Have you observed a change in board behaviours as a result of a formal review?
External board reviews are great. They facilitate a discussion around both individual director contribution but also the collective way the board operates. I have seen boards that changed significantly in the way they operate, and particularly the interface with management improves by involving them in the review process.
Q: How do you attack a multi-hundred page board pack? How long does preparation for a typical board meeting take and how do you highlight or record the questions you want to raise in the board meeting?
Preparation for a board meeting can vary from a few hours if it is a light agenda to several days for a more complex agenda. All my board papers come electronically and I record my questions and highlight points to clarify on the electronic board pack.
Q: Have you ever had a mentor and if so, how did that assist you?
I have had many people over the years who I have regarded as mentors, although we never used that term. In governance they tended to be very experienced directors who were on boards I was just joining. It was (and still is) immensely valuable.
Q: Companies today are increasing their focus on ESG — environmental, social and governance issues. How do you reconcile these matters with ensuring companies you chair are delivering shareholder value?
I think that is easy. Adding shareholder value in the long term is what directors are charged with and ESG aligns completely with that. Taking short-term approaches that might have short-term upside but long-term downside is not in shareholders' best interests. Coming from a co-operative background where there were very long term horizons probably assists with this.
Q: As chair, how do you communicate with shareholders and key stakeholders?
As chair I try to visit major shareholders at least once a year. I also try to speak to the NZ Shareholders' Association as a proxy for retail shareholders regularly as well. One must never forget that directors serve at their behest.
Q: How do you stay current in terms of the knowledge and information you need as a professional director?
I attend a lot of events that people like the professional services firms and the Institute of Directors put on. As an example, I am attending the IoD annual conference this week. I also read a huge amount of material that is either directly or indirectly related to the roles I have.
- Tony Carter is one of New Zealand's most experienced directors and moved into corporate governance following a successful executive career, including as managing director of Foodstuffs. He chairs Fisher & Paykel Healthcare and Air New Zealand and is on the boards of ANZ NZ and Fletcher Building.