Leveraging international expertise in governance
2 min read
13 December 2018
BRANZ’s Board Chair, Dr Helen Anderson, recently hosted an informal lunch for governance expert Professor Ludo Van der Heyden and a small group of New Zealand governance and industry leaders.
The ITA is exploring the role of governance and leadership in industry transformation, particularly given current events featuring company performance.
Governance consultant Graeme Nahkies shares his insights from this conversation.
I was privileged to join this discussion about governance with such an esteemed international leader as Professor Ludo Van der Heyden.
I took three key things away from the conversation which could warrant further investigation in the New Zealand context:
- Firstly, we are experiencing a significant shift in the governance of successful companies who are moving to a ‘stakeholder-first world view’ compared with the solely ‘shareholder-first world view’ that has held sway since the 1980s. It might seem obvious, but focusing first on stakeholders, whose influence is far greater than it has ever been, will lead to better profitability for shareholders.
- Secondly, a company’s board can’t and shouldn’t delegate ‘culture’. Company culture is a core value and should be at the centre of all governance decisions. If this is set at the highest level, incentives for staff to act in a way consistent with the culture will be much greater. Too often, the company culture is developed in isolation of all the other demands of running a company.
- Thirdly, stick to your knitting, keep it simple and excel at what you do best! Some companies strive to move into new areas of business to diversify. Ambitious growth and diversification strategies may lead to over extending, which ultimately can lead to insolvency.
Professor Van der Heyden also advocated for having a specialised bank for the construction sector. I think this could have merit for New Zealand, in the way that Rabobank (and further back the Rural Bank) has supported New Zealand farmers. Working capital can be hard to obtain for housing developments and by new entrants in the building industry. A specialised bank would better understand the unique risks of this industry and be able to help companies manage the risk associated with finance.
It would be good to gain a better understanding of the challenges of governance in New Zealand’s building and construction industry, following the collapse of several companies recently. This needs to be informed by research. Exploring a cross-section of relevant companies, to highlight best practice and challenges, would be a great first step towards raising awareness and identifying sources of support.
Van der Heyden
Professor Ludo Van der Heyden is the INSEAD Chaired Professor of Corporate Governance in Singapore and well-known as a management thinker, educator and advisor.
Graeme Nahkies is a governance consultant and Director of BoardWorks International. He is a member of the governance group of National Science Challenge 11 – Building Better Homes, Towns and Cities.