Brian Gaynor: A decade of change in the boardroom

Huge changes in the business world over the past decade have been reflected in the boardrooms.

Ten years ago, a number of high-profile individuals including Robin Congreve, Bruce Hancox, Sir Selwyn Cushing, Alan Gibbs and Geoff Ricketts dominated New Zealand boardrooms but most have now vanished. They have been replaced by Jim Syme, Colin Beyer and Dr Roderick Deane.

That is the conclusion to be drawn from a survey of all listed companies in 1992, 1997 and this year. Directors were ranked on the basis of the following points system:

* The chairmen of the five largest companies were given 5 points each and the other directors 3 points.

* The chairmen of the remaining NZSE-40 companies were given 4 points and the other directors 2 points.

* The chairmen of all remaining listed companies were given 3 points and the directors one point each.

This scoring system benefits individuals who have been directors of several medium-to-large companies. Peter Shirtcliffe, who was Telecom chairman from September 1990 to September 1999, is not ranked near the top because he had few other listed company directorships.

Ten years ago the sharemarket was particularly concentrated, with the largest five companies representing 61 per cent of total market capitalisation.

Peter Grayburn, a chartered accountant, was then the most prominent listed company director. He was chairman of Cavalier and Ceramco and a director of Corporate Investments and Salmond Smith Biolab, four reasonably large companies at the time.

Robin Congreve and Sir Selwyn Cushing were not far behind. Congreve held the chairmanship of BNZ Finance and was a director of the Bank of New Zealand, Fay Richwhite and Lion Nathan. Sir Selwyn chaired Carter Holt Harvey and was on the boards of Air New Zealand, Brierley Investments and Eastern Equities.

Bruce Hancox was chairman of Brierley Investments, Sir Colin Maiden chairman of Fisher & Paykel, Syd Pasley chairman of the Bank of New Zealand and David Sadler chairman of Progressive Enterprises. All four had a number of other directorships.

In 1992 the business community, especially at the listed company level, was united around the views of the Business Roundtable. Doug Myers, David Richwhite, Bob Matthew and Alan Gibbs, who all played a major role at the Roundtable, had a big influence over Telecom, Brierley Investments and Lion Nathan, three of the five largest companies.

Five years later their influence had begun to wane and other professional directors, particularly Sir Colin Maiden and Bill Falconer, were coming to the fore. Sir Colin, vice-chancellor of Auckland University from 1971 to 1994, was chairman of Fisher & Paykel and Independent Newspapers and a director of Progressive Enterprises, DB and NZ Refining.

Sir Colin is the only director to be ranked in all three periods. Arguably, he has been the country's best professional director over the past decade as none of his companies has made major mistakes and he is highly regarded by his fellow directors.

In 1997 Ian Farrant chaired both Broadway and NZ Salmon while being a director of several other South Island companies. Bill Falconer, a barrister and former chief executive of Petrocorp, was chairman of Hellaby, Restaurant Brands and St Lukes and an Evergreen Forests director.

Sir Selwyn and Norman Geary were on a large number of boards but the former had yet to take up his position as chairman of Brierley Investments and Air New Zealand.

The Business Roundtable no longer holds the New Zealand business community together and it has fractured in the past five years. There is a leadership vacuum at the top of the commercial sector as many of the business leaders of five to 10 years ago have moved overseas.

The sharemarket reflects this as the top five companies now represent only 43 per cent of the market's total value compared with 59 per cent in mid-1997.

Telecom is still the largest company and Carter Holt Harvey is in second place, but their market values are considerably lower than they were five years ago.

Fletcher Challenge has disintegrated and Brierley Investments and Lion Nathan have gone overseas. Contact Energy, The Warehouse and Air New Zealand have replaced them.

Brierley Investments' influence has vanished and there are fewer individuals holding multiple directorships. Only six directors now have eight or more points compared with 12 in 1992 and 10 in 1997.

Jim Syme, who is chairman of Eldercare, Kiwi Income Properties (the management company of Kiwi Income Property Trust), Software of Excellence and chairman designate of Waste Management, is top of the list. He has a finance industry background.

Colin Beyer is chairman of Tower, Capital Properties and Summit Gold. He is a senior partner of Simpson Grierson and has considerable influence in Wellington.

Dr Roderick Deane, who started his career at the Reserve Bank, chairs Telecom and Fletcher Building.

John Palmer, the chairman of Air New Zealand and Wrightson, is one of several listed company directors with a rural sector background. Sir Dryden Spring and Warren Larsen are others.

These appointments reflect the dearth of new talent coming through from the non-rural productive sector. Many of our more prominent directors have a legal, accounting or financial background and it is difficult to identify many influential directors who have had a managerial role in the productive sector.

Some of our more prominent directors have come from the stockbroking industry. These include Peter Shirtcliffe, Sir Selwyn Cushing, Phil Pryke, chairman of Contact Energy, Paul Baines and Chris Liddell, Carter Holt's chief executive. Tim Saunders also has a finance and consultancy background, and Mike Smith was the former chief financial officer of Lion Nathan.

Newcomers, including Roger Armstrong (Tranz Rail), Jon Cimino (Genesis Research & Development, Tranz Rail and Waste Management), Murray Doyle (Blis, Michael Hill, Kirkcaldie & Stains and Southern Capital) and Stuart Johnston (Briscoe and GDC Communications), also have stockbroking backgrounds.

These are all highly capable individuals but there should be more people with managerial experience in the productive sector sitting on the boards of the largest listed companies.

Another issue facing shareholders is the low level of share ownership of leading directors compared with 10 years ago.

A study by Quin Casey, a former student of the University of Waikato, concluded that the best-performing NZSE companies were those where director ownership was between 5 and 25 per cent. The study found that once board ownership went above 25 per cent, the value of the firm was adversely affected because managers were no longer accountable to minority shareholders and had less fear of being replaced. Trans Tasman Properties is a good example of this.

In 1992 many prominent directors had significant shareholdings or represented companies that had large stakes. These included Robin Congreve, Sir Selwyn Cushing, Bruce Hancox, Alan Gibbs, Geoff Ricketts, Doug Myers and David Richwhite.

None of the directors at the top of the 2002 list have large shareholdings or represent a major shareholder. The Warehouse is now the only top 10 company where board ownership is close to the preferred 5 to 25 per cent range and the discount retailer has benefited as a result.

* bgaynor@xtra.co.nz