- The Review Proposal seeks to appoint nine independent directors with diverse skills for NZR’s board.
- The unions’ proposal demands experienced provincial board members, including those with Te Ao Māori and Pasifika backgrounds.
- There is widespread concern over NZR’s financial management and the recent reduction in provincial funding.
- There’s a broad call for a leadership overhaul within NZR to ensure future success.
ANALYSIS
It’s fitting, given rugby’s laws are so open to interpretation, that two distinct narratives have evolved to characterise how the sport has operated in the past four years.
The establishment view is that rugby has repositioned itself to thrive in the modern age.
Their story carries strong themes of innovation and adaptability – of a sport renowned for its conservative thinking being brave enough to leave behind its analogue past and charge into a digital future with a trickle-down business model that will commercialise teams in black to nurture the grassroots.
The main achievement as they see it, has been to bring in a private equity investor to flood the game with capital, access previously unreachable expertise and open doors to international markets that will ultimately yield new fans and more revenue.
A professional women’s competition has been launched, as has an in-house TV channel, Super Rugby’s broadcast numbers are on the rise, elite talent still wants to play most of their careers in New Zealand and a new international bi-annual international tournament will shortly be announced to give the July and November test windows greater meaning and commercial value.
New Zealand Rugby accepts that this path has been turbulent, but only because of the scale of change that has been implemented.
Transition is never without victims, and since 2020 some stakeholders have had to be repositioned, while the arrival of the Covid pandemic forced a re-evaluation of everything, from competitions to partnerships to relationships – many of which had to be rescoped.
But outside the halls of power, the past four years have been viewed merely as turbulent and dysfunctional.
There are former All Blacks captains and coaches, Super Rugby heavyweights, provincial stalwarts and former high-profile administrators who have all told the Herald that they fear rugby is now a game on the edge, potentially facing financial ruin and irrelevancy in the sporting landscape.
There was never unanimous agreement among rugby’s wider stakeholders that there was any justification for doing a deal with Silver Lake, while the initial process antagonised the professional players due to the lack of consultation and the way they were accused of being greedy and self-serving for objecting to it.
Now that the US fund manager Silver Lake has been invested for two years, even some who backed the deal are questioning whether it was the right thing to do given the lack of revenue growth that has materialised.
So too are questions being asked in club rooms and board rooms across the country as to where all Silver Lake’s money is going as the financial presentations show the losses are mounting. And having been sold a vision where the grassroots would be saved, provincial unions were last month told their annual distribution from NZR is being cut by $1.8 million this year and next.
The number of teenage boys playing the game continues to drop and even though female participation numbers are growing, there’s a barely hidden sense that the elite players feel frustrated by the speed at which professionalism is unfolding – many have publicly stated their disappointment that Super Rugby Aupiki remains a four-team New Zealand-only competition, and the Herald has spoken to several well-placed sources who say they fear that the NRL is ultimately going to win the war for talent simply by investing more in high-performance.
This alternative narrative was perhaps best articulated by former All Blacks coach Sir Steve Hansen, who was so exasperated by the way the game was being managed in 2022, that he told the media: “The relationship between the [NZR] board and the exec and players at the moment is probably the worst it’s ever been.
“The way they handled the new money scheme ...[former chairman] Brent Impey came out and just absolutely roasted the players with no consultation,” Hansen said.
“I don’t think they’re doing their job right at the moment.
“So let’s start there and let’s get that right.
“If you look back to when we were really successful from about 2010 through to 2019, which was our most successful era, the board and the exec at the rugby union were humming.”
From schools to provincial unions to Super clubs to the All Blacks, there has been a widely held and growing conviction that the game is heading towards self-destruction.
These two narratives, however conflicting they are, have one area of commonality – they both believe that the game has an enormous decision to make on May 30 when the provincial unions come to a Special General Meeting to choose between two governance change proposals.
The past four years have been endlessly disruptive, and a sport that prides itself on its sense of community and unity has become divided and fractious, and the SGM represents an opportunity for the game to begin the process of healing itself.
NZR chair Dame Patsy Reddy said: “I believe that this is a moment in time where we can reset for the future and it will be a reset that involves everybody and focuses everybody on outcomes, and the outcomes are for all in rugby.”
SGM to decide rugby’s fate
The SGM is being framed as a pivotal moment in the history of the game because, either way, it will deliver constitutional change and redefine who the key stakeholders in the modern game now are.
But it is also much bigger than that – less abstract and fundamentally connected to the ability of rugby in New Zealand to retain its status as the country’s national sport.
The provincial unions are going to the polls at the end of the month because, in August last year, a 134-page independent report was published – known as the Pilkington Review - that concluded NZR’s governance structure was no longer fit for purpose.
It did much more than that, though.
It overtly and indirectly highlighted that NZR has a dysfunctional relationship with its member unions, consistently fails to communicate adequately and effectively with stakeholders, and that the sport has failed to adapt quickly enough to keep up with the speed of social change.
The overall impression it gave was that rugby in New Zealand is riddled with petty politics, lacks strategic cohesion and operates with a chaotic level of mistrust between the governing body and invested partners.
The report stated: “Strong governance, enabled by a fit-for-purpose board appointment process, is essential to ensure an aligned and cohesive approach to all facets of the game.
“Rugby remains a hybrid professional/volunteer structure operating as a federation (grouping of Incorporated Societies).
“Efficient functioning requires role clarity, aligned planning and - importantly - clear mutual accountability for all the moving parts within Rugby Inc.
“Many of those elements are absent or present in part only.”
Calls for board overhaul
The report recommended moving to a new system of having nine independent directors appointed by an independent panel because it believes that this system will give NZR the requisite skill sets and experiences within its board to oversee risk better and to better evaluate and measure the ability of the executive to implement strategy.
The implication within the review is that the NZR board cannot properly evaluate executive performance, enforce measurable and clear objectives and put staff and the organisation under the right sort of scrutiny to ensure they are being held accountable.
The vagueness of the current set-up was best encapsulated by this statement: “The chief executive’s reporting dashboard has 48 Key Performance Indicators; most of them are tactical at best and lacking measurability.
“There is simply too much indistinguishable detail coming to the board.”
Critically, the review also highlighted the need for NZR’s board to contain individuals whose knowledge, experience and skills are commensurate with the individuals serving on the board of the newly formed New Zealand Rugby Commercial [NZRC] which houses all the game’s revenue-generating assets.
Having a clear and functioning understanding of NZRC is a high priority for NZR, especially as at least two directors sit on the boards of both entities.
The evidence that NZR has not had a clear line of sight on NZRC’s activities or efficient oversight of its strategy, is likely to be borne out when the national body posts its annual financial results shortly.
The expectation is that NZR will be posting another loss, but not as significant as the $47m deficit that it suffered in 2022.
Silver Lake’s $200m investment into the game, combined with its global expertise in various areas, was supposed to see NZRC open lucrative new revenue streams but, instead, presentations were being made to stakeholders earlier this year showing scenarios where the private equity cash could be burned through by the end of the decade.
The whole sport is dependent on NZRC being able to achieve its financial goals and the right questions being asked in the boardroom.
The provincial unions have already found out the consequences of NZRC coming up short of its revenue targets as it is the lower than forecast income, which has resulted in their collective funding being cut this year and next.
The crux of the argument within the Pilkington Review is that if NZR can get its governance process right and populate its board with the right people with the right skills, then it will lead to a culture of greater executive accountability, better strategic alignment between the game’s various stakeholders, and ultimately it will rebuild trust and confidence in the sport’s wider leadership.
Dueling proposals stir controversy
Both proposals being presented at the SGM say they will deliver the requisite change the Pilkington Review called for, and deliver the independent, modern, fit-for-purpose governance structure rugby needs.
But the NZR board, the New Zealand Rugby Players’ Association and the five Super Rugby clubs would argue that only one proposal will set the game up for a better future.
Not that they get to a vote, but if they did, they would cast it in favour of adopting the Review Proposal, which wants to appoint nine independent directors who collectively must satisfy an overall skills matrix.
The proposal put forward by the unions demands at least three members in total to have had a minimum of two years of experience serving on a provincial union board, one of whom must have lived experience in relation to Te Ao Māori in a complex organisational context and one of whom must identify as Pasifika.
It is a proposal that is effectively preserving a representative board, which, according to the Pilkington review, is one of the key failings of the current set-up.
“We were told by many, that the NZR board and NZR staff are constantly mindful of upsetting the member unions and the threat of member unions calling a special general meeting to remove the NZR board is ever present,” the report said.
Not only will the union’s proposal, if implemented, potentially leave the board lacking the independence the review has called for, but so too will the prescribed criteria around the two-year provincial governance experience potentially limit the pool of directors who are eligible for appointment.
The case is irrefutably made in the Pilkington Review that if rugby is to unify and rebuild – draw a line under the past four years - it can only do so if it puts strong, independent, high-quality directors on the NZR board with the requisite knowledge, skills and experience to get the best out of the game’s other leaders.
And it’s the fact that most, nearly all, provincial unions seemingly agree with this and yet continue to be wedded to voting for a proposal that is a modified version of best practice governance rather than the one that is best practice governance, which has baffled many in the rugby community.
The Herald has spoken with several union representatives who say they are dismayed that they were told by NZR that community rugby would be the big winners from the Silver Lake deal, and yet the arrival of the American fund manager has coincided with a cut in provincial funding.
Several sources have said they are concerned about the financial management of the game given the mounting losses and relatively bleak forecasts.
And there was widescale condemnation of NZR when in early April it sent the terms of reference for a review it is calling MPAC – Men’s Pathway and Competitions - to the unions, in which it said it was working on the assumption: “That future broadcast revenue values for the NPC will be significantly lower than previous broadcast agreements, on the basis that Sky TV is not expected to wish to bid for rights to broadcast every NPC / FPC [Farah Palmer Cup] game moving forward.”
Unions demand change amid trust crisis
The statement about Sky having flagged an intention to cut the NPC from its broadcast package was not true, and given the significance of that message, the delivery via email was deemed cold and inappropriate.
The full extent of how much the unions lack trust and confidence in NZR’s leadership was exposed in late November when the Herald obtained draft correspondence that the provinces were working on sending to the national body.
In this version, the unions wanted assurances from the existing board that no matter what governance structure was ultimately agreed upon, the number one priority in 2024 would be to drive major change in the executive and leadership of NZR.
The letter expressed doubts about the ability of NZR’s management team to follow a coherent strategy, build and maintain relationships with key stakeholders and international partners, foster trust and communicate effectively.
In that letter, the unions said: “Before we provide specific feedback on the recommendations in the Pilkington Report, we want to stress that while the report and its recommendations are specific to the governance of NZR, the report strongly indicates the need for a significant change in direction in leadership and management across the organisation.
“While we agree that proposed changes to governance will create the right environment for a more productive and sustainable future, nothing will change unless there is a targeted focus on shifting the leadership and management practice within NZR.
“Areas of the report identify strategy, culture, communication and relationships as sub-standard, and while the provincial unions can accept some responsibility for this, we need to see a demonstratable lift in leadership from NZR to forge a new path forward for the rugby system.
“Only NZR’s governance (board) can implement this change, so whatever model we land on for the future, the board of NZR must make this focus on leadership accountability their top priority for the future of the game.
“We are seeking assurance from the NZR board that this will be a priority under any new agreed governance model.”
Rugby is at a crossroads it perhaps never expected to be at nine years ago when the All Blacks won back-to-back World Cups and everyone – from the grassroots volunteers to the chair of the board – could feel they had in some way played a role in Richie McCaw lifting the Webb Ellis trophy.
A sport that once stood at the summit of the sporting landscape now has to decide whether it wants to get back up there or fall further into the abyss.
Gregor Paul is one of New Zealand’s most respected rugby writers and columnists. He has won multiple awards for journalism and has written several books about sport.