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    Have you seen the poppies?

    Societal Wellbeing
    My wife and I had the opportunity to see the poppies at the Tower of London first-hand in early September, as the display commemorating the soldiers that paid the ultimate price in World War 1 was being prepared. This is what we saw:
    Picture
    Picture
    As impressive as it was at the time, the display then is not a patch on the moat today, now that all 888,246 poppies have been "planted". The poppy had huge significance for the allied soldiers on the Western Front. It continues to be significant for their descendants. I am looking forward to visiting the commemoration again, on Monday 10 November—along with a great many others, I suspect.
  • Published on

    CEO pay: one in four think that time is more important the money

    Governance Management Performance Societal Wellbeing Time Management
    The rather sensitive matter of CEO pay has raised its head (again) today. Stories of ever-larger packages have appeared in the news columns with metronomic regularity in recent years. However, change may be on the horizon. According to the findings of a new survey conducted by Strategic Pay, one in four CEOs would take a pay cut if offered other benefits, including more time with family.

    Clearly, some CEOs think that time is more important than money; that there is more to life than work.

    These findings suggest that the runaway train that is CEO pay may not be boundless after all, although some CEOs will dispute them, no doubt. However, knowledge of these results creates an opportunity for boards to initiate a much needed conversation—for the health of the CEO and the good of the company.
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    And so the CEO remuneration escalator continues...upwards

    Governance Leadership Performance Societal Wellbeing
    The latest round of annual reporting in New Zealand confirms that the size of CEO remuneration packages are continuing to track upwards. Reports from SkyTV, Ebos and others suggest that the now well-established trend shows no signs of slowing down.

    The concept of executives (actually, all staff) receiving remuneration commensurate with their performance and the value they add to the corporation sits comfortably with me. However, the steady spiral upwards of CEO packages, at what seems to be an unchecked rate, may be the harbinger of a longer term problem: that any linkage between the package, actual performance and market forces is lost. If boards are truly focussed on the optimisation of performance in accordance with the wishes of shareholders, then boards need to ask the following three questions every year:
    • Is value being delivered by the CEO? 
    • What is the company prepared to pay for that value?
    • Are alternative CEOs available if the incumbent declines any package offered?

    I am sure that the first and second questions are being asked by boards: the evidence is in the packages. However, I suspect the third question gets much attention. If a board was exploring its options, the likelihood of being captured by the CEO (or their reputation at least) should be much lower. While easy answers are unlikely to exist, boards need to grapple with these matters, by asking and acting on all three questions. Until they do, the law of supply-and-demand is likely to prevail, and the upward trend is likely to continue unabated, possibly to the detriment of long-term shareholder value.
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    Another example of directors escaping guilt: has justice been served?

    Governance Performance Societal Wellbeing
    More news on the Feltex front today: a judge has just cleared the directors of liability for disclosure failures. I have discussed the sorry story of Feltex before. That the directors were charged seemed to be fair, given the seemingly strong evidence that something was awry. However, the judge has now issued their reserved judgement. Many will be surprised that, in the face of incriminating emails and other evidence that directors knew there was a problem with the business fundamentals, the decision was not guilty. However, and interestingly, the judge did note "some justification" for the criticisms of the prospectus upon which the case was based.

    Is this a case of well-heeled directors being able to rally a strong defence to protect their reputations, or was no wrong done? Regardless, the decision has been made, and with it a potentially dangerous precedent has been established—that the standard of accountability for directors may actually be quite low. While this is good news for directors, I'm not sure it is good news for shareholders, or for society more generally.   
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    Congrats IoD—now others need to take heed

    Governance Leadership Performance Societal Wellbeing
    The Institute of Directors has just played a wonderful hand, and in so doing may have started an important transition—from being perceived as being a nice club for well-to-do directors, to being a forthright influencer in the commercial world. In recent years, most professional bodies seem to have concentrated their efforts on recruitment, membership services and education. Some, including the Institute of Directors in New Zealand, have established a chartered director programme, in an effort to raise the level of professionalism across the director community. However, one important element has been missing, or at least not apparent, until now: lobbying.

    The Institute seems to have emerged from the shadows however, by taking this tough stance on executive remuneration. While the move may not win many friends amongst those who frequent the top echelons of corporate power, it signals a return to the principles of the royal charter under which the organisation was formed. It also signals intent: to hold directors accountable and, hopefully, to commence an active lobbying initiative. That standards of professionalism be raised, lawmakers be influenced and directors be held to account bodes well for shareholders seeking to wrest back control of the companies that they own. It also bodes well for the community, because high company performance is an important contributor to economic growth and societal well-being. 

    Congratulations are due to the Institute. Simon Walker and his colleagues have made a bold move. Now we need to see more of this type of behaviour—from the Institute, and from the institutes in New Zealand, USA, Australia and elsewhere.
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    Has the time to hold local councils accountable arrived??

    Governance Leadership Management Performance Societal Wellbeing
    I am on record as being a critic of the way local councils often go about their business. Councils were established to provide common/shared infrastructure to support the growth of towns and cities, and to set some rules (bylaws) around the operation of infrastructure. However, many councils have claimed a greater remit over the years, with attempts to drive economic development (what do councils know about business?), sister city programmes and so forth. Yet few of these schemes have delivered much to ratepayers except cost. I have a sense that local councils have lost sight of their "core business", and that the mayor and the council (ie. the chairman and the board) have lost sight of their role in many cases.

    However, things may be starting to change. The problems with the issuing of building permits and the maintenance of appropriate standards of construction provide a case in point. The Christchurch City Council lost the right to issue building permits because it was doing such a poor job. Now, the judicial system has ruled that affected parties can bring a case against Auckland City Council in respect of poor construction standards (the so-called leaky building problem). I applaud these decisions. Hopefully, they will cause Mayors and Councils to take their core roles more seriously, and hold their CEOs to account for performance more directly. That will be a good thing, for ratepayers and citizens alike.