Board's failures destroy homeowners' faith

By MICHAEL MARRIS*

Much criticism has been levelled at Bill Porteous, the erstwhile chief executive of the Building Industry Authority now making an appearance in a new fairytale guise as a "policy adviser". See how the wicked wolf has become Little Red Riding Hood.

Public concern flowed from the unmasking of the leaky homes syndrome and the significant losses being borne by homeowners. The authority became like a Baghdad presidential palace - under continuous bombardment. The Government, in a nearby bunker, donned a flak jacket and appointed a select committee. Aggrieved homeowners consulted lawyers, and various industry groups incanted dark spells over the authority.

Last week the select committee lobbed a Scud missile at Dr Porteous, who managed to flee just in time to an underground bunker and escape its direct blast. He emerged as an adviser to the authority.

Public cynicism runs high at this crude subterfuge, and the Government chanted hollow incantations such as "he took the honourable option". Match that against MPs' own titles as "Honourable Members" and form your own conclusion.

But while it is attractive to designate Dr Porteous as the villain of the piece and, indeed, his ineptitude and mismanagement seem well established, there exists a more insidious and deeper flaw. The failure is less that of the chief executive and far more that of the board of directors: it is a classic case of governance failure.

That it has been compounded by the reintroduction of Dr Porteous in a new guise is heinous but consistent with the deep systemic failures at board level.

The authority chairman, Barry Brown, in a naive, disingenuous and complicit manner, talked of the "unwarranted attacks" on Dr Porteous and said he was "disappointed by criticisms" of him.

These comments flush out the real failure in this saga: the failure of the board (eight members appointed by the Government) to consider, much less practise, ordinary and accepted principles of good governance.

What could good governance have looked like in this situation?

First, the systemic mismanagement of the authority that had reportedly being going on for years would have been unmasked by professional and rigorous performance reviews of Dr Porteous. He was, after all, the only employee for whom the board was responsible (other employees were the responsibility of the chief executive).

The board of the authority (and any other entity) is charged with the assessment and oversight of the chief executive's performance. This requires both rigour and sensitivity and should be performed at least annually.

If this ever happened, it was crude and deficient. That is a governance failure: solely the responsibility of the board.

Good governance would have been reflected by an annual performance review of Dr Porteous that would have revealed his severe management deficiencies.

Second, good governance would long ago have discerned the systemic failures in the authority's operation. Mr Brown should have been more sensitive to how internal processes were functioning.

Deficiencies of the extent revealed to the select committee should have been apparent, over time, to him.

Third, good governance would have witnessed strong and decisive board leadership and management of the internal crisis (as well as the external crisis) when the leaky homes situation was publicly revealed.

The internal crisis was the public scrutiny of the authority last year, and the strategic policies that were adopted to manage this. Clearly these were deficient: more of the head-in-the-sand approach that seems had already characterised Dr Porteous' response to the original situation.

The external crisis was the phenomena of the leaky homes. Again there seems to have been a poverty of good governance, illustrated amply by the failure of the board to issue strong and clear public statements.

This paralleled an equal failure to take decisive action to resolve what clearly and quickly became issues of magnitude (in terms of both numbers of homeowners and numbers of dollars). Reassurance and action were required by a frightened homeowning public. Neither were provided by the board.

Fourth, good governance would have seen the board insist that Dr Porteous, at a minimum, step aside until all these issues were cleared and evaluated by the select committee. The chairman should either have assumed that role, on an interim basis, or nominated a suitable person.

In a commercial sector entity, that would have been the least the chairman would have done. In a public sector organisation, such as the authority, where not only is there strong public interest but a deep and vested concern driven by our culture of valuing home ownership, such positive governance should be obvious and mandated.

Fifth, Dr Porteous continues to receive the support of Mr Brown. Instead, the chairman (and the voiceless board behind him) should be endorsing the select committee report and pledging ways to redeem the internal culture of the authority and to address the leaky homes crisis.

Sixth, there is the reincarnation of Dr Porteous as a policy adviser. Mr Brown and the board have agreed to this option. They may, indeed, have constructed it. It is yet another abysmal failure of governance. The wolf does not become Little Red Riding Hood in any fairytale, let alone real life. This is real life. It is real people who have been affected and whose investments have been hugely diminished.

Good governance would assert that Dr Porteous has no place in the authority. If a policy adviser is required, that should, at a minimum, be a contestable and publicly advertised position. If an outside consultant is required, Dr Porteous could apply. The new chief executive would then, appropriately, make the call.

Public confidence has again been eroded - most significantly in the Government. It, as the beneficial owners of the authority, failed to instil a regime of good governance at board level, and compounded that by allowing the sham and farce that is the Porteous reincarnation to occur.

The board, and its chairman, are the puppets of this policy and the drivers of a process that will forever leave a sour taste in the mouths of many homeowners, and a cynical squint in the eyes of the public.

* Michael Marris is an adviser on governance issues.