Who would want to be a state-owned Government board director? – Fran O’Sullivan

Prime Minister Christopher Luxon (left) and Health Minister Shane Reti speak to media at the Manukau Super Clinic. Photo / Ben Dickens

THREE KEY FACTS:

• The board of Health New Zealand was sacked last week.
• Many of those directors taking on a Government appointment sit on the boards of other well-performing companies.
• The Health NZ board has had three chairs since its inception.

Fran O’Sullivan is a business commentator with more than 40 years’ experience covering markets, politics, foreign affairs and trade. She has written a column for the Business Herald since April 1997 and has won numerous awards for her journalism.

OPINION

Senior directors are quietly questioning whether it is worth the reputational risk of taking on a Government appointment – low director fees and all – to do their bit for “public service” by accepting invitations to join state-owned boards or other Government-related entities.

They have a point.

The high-profile sackings of the boards of Health New Zealand and Kāinga Ora, and the opportunistic leveraging of the Aratere running aground to announce from the Beehive that same weekend the resignation of a KiwiRail chair who had already tendered his resignation behind the scenes, has resulted in raised eyebrows.

Many of those directors sit on the boards of other well-performing companies, where their competencies have not been questioned, or they have held major roles in the public service.

There is a growing perception – fair or otherwise – that the Government will trample on them to make a political point rather than work with boards to gain the outcomes a coalition with different objectives to the prior Labour Government wants.

The Prime Minister is coming from a different perspective.

He is in a hurry to execute a national “turnaround”. If there is governance failure in the eyes of shareholding ministers (and himself), boards will be replaced. He wants directors and taxpayers to know where the buck stops.

Both stances have merit.

When it comes to Health New Zealand – Te Whatu Ora, which Luxon castigated this week, that board has had three chairs since its inception. Rob Campbell, who blew up his position by making comments the Labour Cabinet found untenable but who has remained a public critic, Dr Karen Poutasi and former Inland Revenue boss Naomi Ferguson, in an acting capacity.

The board has also included experienced directors like Vanessa Stoddart and co-opted in other “independents” like Marc Rivers, a former Fonterra chief financial officer (CFO) to chair the audit committee.

This week, the message from the Beehive was loud and clear.

Cabinet was replacing the board of Health New Zealand with a commissioner after “serious concerns around oversight, overspend and a significant deterioration in financial outlook”.

It was another opportunity for the Prime Minister to show just who is in charge in a very dramatic way.

In other words, the Government had sacked a high-profile board, in effect blaming the directors for a deterioration in the financial outlook and along the way having yet another poke at the preceding Labour Government for centralising the health delivery system.

There will be plenty of time to debate whether the Government spin in fact matches reality as various Official Information Act (OIA) requests are fulfilled.

Is it fair, for instance, to lay all the blame for a potential $1.4 billion overrun (in annual terms) at the feet of the outgoing directors? What happens if the incoming commissioner Lester Levy can’t arrest the slide?

It rankles with Kāinga Ora’s outgoing directors that it was a report by former National Prime Minister and Finance Minister Sir Bill English that put the skids under them. They are particularly aggrieved their own feedback on English’s findings is perceived to have been ignored.

There’s an element of fair play here which they (and others) believe has been completely overlooked, as Cabinet serves its own political interests in hammering home perceived institutional failures to make a significant policy switch, and uses the episode to lay more blame on Labour and the Government-appointed directors.

To his credit, newly appointed Kāinga Ora chairman Simon Moutter appears to be his own man. He acknowledged the contribution of departing Kāinga Ora chief executive Andrew McKenzie, saying he had made an “enormous difference” in delivering 4000 new houses this year, however, it was his right to decide eight years was long enough in the job.

In response to Luxon saying Kāinga Ora had been “chronically underperforming”, Moutter said on RNZ he had no wish to disagree with Luxon. However, “It is an incredible achievement to have built that many new homes in this market over the last year and many thousands in the years prior”.

This is not to say the private sector always gets it right.

It doesn’t. Just look at the Fletcher Building board, which months on from the high-profile exits of its chairman, CEO, two other directors and the upcoming exit of its CFO is still rudderless. There is no sign yet of a permanent appointment of a new chair, who should lead the appointment of the new CEO. This is where a controlling shareholder would have forced a result rather than allowing a company that has serious issues to continue to drift.

It’s still too raw for directors of affected boards to talk publicly about their experiences dealing with a Government that to its mind appropriately has the interests of taxpayers at heart.

Some will, over time.

But directors sit on other boards that intersect with Government and will pick their battles.

What they will do is exercise their own due diligence more rigorously before accepting a Government-related role.