Obituary: John Fernyhough

By ARNOLD PICKMERE

First first chairman of the state-owned Electricity Corporation of New Zealand, or Electricorp. Died aged 64.

Colin John Fernyhough, multimillionaire and first chairman of the state-owned Electricity Corporation of New Zealand, or Electricorp, was a major figure in the business world of the 1980s and 90s.

He already had well established business interests when, in 1987, he became chairman of Electricorp, the state-owned enterprise which replaced the sprawling New Zealand Electricity Department.

The result was one of the overdue but acutely traumatic overhauls of New Zealand's entrenched Government departments, in which many employees assumed they had a job for life.

Fernyhough, who died after a long battle with cancer, was one of the main architects of the state-owned enterprise model - an incisive, determined businessman and intellectual who regarded Sir Geoffrey Palmer's pride and joy, the State Owned Enterprises Act of 1987, as purely an "in-between stage" on the way to privatising most of the state enterprises.

But the overhauling of Electricorp was a job of which Fernyhough later confessed he felt "not terribly proud" because of the stealth involved. It conflicted with his own declaration: "I found at an early age that the best way to win is to be open."

Fernyhough set up a small taskforce and staffed it with "the best young brains I could find".

To get the management to accept the taskforce he told them that it had been appointed only to audit their organisation. In fact, their job was to produce a whole new blueprint breaking it into functional segments.

The following year he recounted to an economic conference in Brisbane (reported by the National Business Review) some details of a meeting of senior staff he held a week before the changeover. People were nervous, as the staff knew their jobs were up for grabs.

He told them that the new approach meant managers thinking of their chunk of the business as if they owned it and figuring out what they would do with it if they did.

"Oh, you mean I wouldn't have to spend the balance of my budget this week," said one manager.

As well as a change of attitude, Fernyhough wanted a subdivision and delegation of authority with clear lines of accountability. He found the department production-led, highly centralised and with a very powerful administration in the middle.

"If you don't get on top of that organisation in the first month, it will surely get on top of you," he warned.

Within a year, Fernyhough and his hand-picked chief executive, Rod Deane, had achieved $100 million in continuing annual savings. Other substantial benefits had been achieved and staff numbers had been cut by 25 per cent - a move he described as difficult, painful and expensive because of the redundancy packages. Hundreds of people lost their jobs.

The political climate changed when National took office in 1990 and the behaviour of state-owned enterprises became highly politicised.

In 1993 a parliamentary select committee inquiry found that Electricorp had no justification for a proposed 3.6 per cent increase in the wholesale price of electricity.

That year, seven years after starting the process which turned a government department into a hugely profitable corporation, Fernyhough quit.

He reckoned then that the real average price of electricity had dropped 14 per cent in the seven years and that Electricorp had paid the Government $1.1 billion in dividends and $500 million in taxes.

He said Government meddling in the affairs of the $6 billion state-owned enterprise and a lack of political will to privatise it were among his reasons for stepping down.

He viewed the pricing decision as meaning that all pricing decisions by Electricorp were politically controlled and investment decisions were also at the whim of politicians. He felt powerless to control those two fundamental business ingredients.

The Government as an extraordinary shareholder had a different view. Only the previous year it had set up two new watchdogs to keep an eye on state-owned enterprises.

Apart from the groundbreaking Electricorp years, for which in 1993 he was receiving the quite modest stipend of $42,000 a year, John Fernyhough had a long, varied and successful business career which saw his expertise as a director sought by many organisations

Before going into public service he had practised commercial law, had been a partner in Chapman Tripp & Co, then Russell McVeagh McKenzie Bartleet & Co and later out on his own as a barrister. He had a masters in law degree from Victoria University and studied law at the University of Chicago on a Fulbright scholarship.

He moved into business in the early 1980s, forming links with several other successful businessmen, including Alan Gibbs, Charles Bidwill and Douglas Myers. He accumulated a personal fortune estimated by the NBR last year at $30 million, the result of an involvement in Tappenden Industries and from being a director and substantial shareholder in Lion Corporation.

Fernyhough also made a name for himself when in 1987 he bought a $4 million mansion in Remuera, believed to be the highest price paid for a home at the time.

He had three sons and a daughter by his first marriage to Judith (nee Bailey), which ended in 1985, and then married Christine Don, well-known as a philanthropist and with whom this complex man shared interests from classical music and art to sailing and golf. He also built up a private collection of 40 classic English sports cars.

Fernyhough had a mild stroke in 1999 but continued to hold his directorships and to offer such incisive views as his suggestion that the merger which produced the dairy giant Fonterra was "seriously flawed" and likely to harm farmers, the community and the economy.

His funeral will be held in St Mary's in Holy Trinity, Parnell, at 2pm on Monday, followed by a private burial.