Flying high from a hospital pass

By CHRIS DANIELS

It looked like the ultimate hospital pass when John Palmer took over as chairman of Air New Zealand.

The company had been nearly bankrupted, Ansett had collapsed and morale was low.

Palmer, who describes himself as "an activist, but not interfering director" was appointed at the behest of the Government, who had bailed the airline out to the tune of $885 million.

When he took over the reins in 2001, he was shocked at what he found - for there were problems not just on the balance sheet, but throughout the entire organisation.

"The financial strife was obvious. What wasn't obvious on the outside was the extent to which the executive team was shattered by the whole Ansett experience," he said.

"The atmosphere in this building in particular was something I was unprepared for - and I've been in some pretty difficult business situations. The shattering effect on the executive team - the loss of confidence and, without being too unkind, almost a sense of disbelief that this could have happened to an icon business."

This sense of disbelief was something that long-serving managers "were having difficulty coming to grips with".

Finding a new chief executive was "a reasonably fraught process" until Ralph Norris - at that time a director - asked to be considered for the job.

"Having a chief executive with strong people skills and a strong customer focus was what we were looking for and he's been very successful in that," Palmer said.

Because of Norris' level of experience he was also able to be the public face of the business.

"Being the public face of Air NZ is the role of the chief executive.

"My role as chairman is to make the chief executive and the management team successful."

Was there a streak of arrogance - a 'How could this happen to us?' feeling in the company?

"There was quite an element of that - I guess that's one thing noticeable coming in from the outside and one of the things that I personally felt had to be changed and changed rapidly."

Palmer said such attitudes were "not the sort of thing that would be tolerated.

"We had to change some of those attitudes.

"At the same time, we had to give confidence to the business that firstly we were able to grow our way out of it, and that we were confident that there were the skills and capability inside the organisation to make the business successful."

Is he surprised at the quick turnaround? The sheer speed of the recovery?

"To be honest, yes. To think we could have made the sort of progress in 2 1/2 years that we have made is not something I would have been betting on at the time."

Palmer has been self-employed, running his own diversified horticultural business for the past 35 years.

In the past 20 years, he's also been a non-executive director in agricultural-related industries, finance and banking.

It means he has come to the job of chairman not through the process of being a senior executive in a big listed company. He is a governance guy.

"I think that it's a rather unusual path - to be sure, but the advantage it brings is that firstly it brings reasonably diverse experiences. There is nothing like the experience of actually running your own business, being used to actually paying the bills every month, being responsible for all aspects of the business."

In June this year, Palmer lost his job as chairman of rural services company Wrightson, after a three-month takeover campaign headed by former Fonterra chief executive Craig Norgate and his Rural Portfolio Investments.

The battle got publicly acrimonious, with a new breed of more aggressive players pitched against the more low-key style of Wrightson and Palmer.

Palmer and his board at Wrightson accused Norgate and his team of bullying tactics, and unfairly attacking the company's chief executive, Allan Freeth.

So is it getting nastier at the top?

"No, for me there was no personal agenda involved in the recent Wrightson bid by Craig Norgate and RPI, but there were certain levels of behaviours and activities that the Wrightson board took exception to and I certainly took exception to.

"If you've got certain values, ethics and behaviours, and they're contravened, then you have an obligation to do something about it."

After losing his position at Wrightson, Palmer said he was still happy with the challenges of the Air NZ job.

"We are now facing those many challenges with a balance sheet that is in good shape, with a revenue line that certainly is still under pressure, but with some parts of the revenue line we think we're well-placed to deal with the competition.

"There are other parts where we know it's going to be really tough."

Palmer said he would be more than happy to spend all his time developing his own business interests in Nelson.

"I determined a few years ago that I was only going to take on roles that I thought were really interesting and the Air NZ role has certainly fulfilled that.

"I'm not really a status quo director - I am much more attracted by the challenge than just by being involved in corporate life."

Ask Palmer if there is anything he feels the public should know about New Zealand corporate governance and he will say the country is well-served, that those men and women in charge of big companies are doing a good job.

Overseas-style Enron corporate scandals have damaged public confidence in corporate governance, but he said the responses to that should not be overdone.

"While I accept the need for improved processes, it is important that people at all levels, including the investing public, understand that no amount of law and legislation is going to change crooks into good guys."

While directors needed to be people with skill and experience, if they didn't have a high level of integrity and ethics then Enron-style scandals could be expected.

"Perhaps one of the advantages you have after doing business as long as I have is that you've proved your business judgment and I think it is the ethics and integrity that's really important at the governance level.

"No amount of legislation is ever going to solve that.

"You have got to make sure that that is the way the board operates because that affects the way the company operates.

"What I see in corporate New Zealand, the standards being set here in New Zealand are generally high."

John Palmer

* Age: 57

* Married with two adult sons.

* Education: 1960-1964, Nelson College.

* 1965-1968: Lincoln College-University of Canterbury, B. AgrSc. Farm management and economics.

* Chairman: Trustbank Canterbury, 1998-1992.

* Director: AMP Bank Ltd (Sydney), 1998-2002.

* Chairman: New Zealand Kiwifruit Marketing Board, 1992-1997.

* Director: Zespri International, 1996-1997.

* Chairman: Wrightson, appointed director November 1997.

* Chairman: Air NZ, appointed November 2001.

* Director: AMP Life, appointed May 2004.