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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.
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    On the unravelling of a business

    Governance Leadership Management Performance Strategy
    I have mused on the downfall of Postie Plus twice recently: when trading was halted on the stock market, and then when an administrator was appointed. Today, a third instalment: an initial impression of what went wrong, and what boards can learn from the case.

    The Postie Plus board and management appear to have lost sight of the company's purpose. The company's genesis was as a provider of good quality, affordable clothing that was good value for money. However, in recent years, the company has found itself competing in a higher fashion segment of the market, something that the chairman—remarkably—is on record as saying that the company did not aim to do. On this information, the company was operating at variance to its strategy. Gosh. The questions that emerge from this revelation flow thick and fast. Why did the board allow this to happen? Was the board watching? Did the board know? What was the board thinking? 

    The board is responsible and accountable for the achievement of business performance outcomes in accordance with the wishes of shareholders. Yet in this case, decisions were made (or, not made?) that resulted in the company performing less well over an extended period. Sadly, the board took little, if any, action. The Postie Plus board knew something was amiss two years ago. An interview with the chairman in December 2012 corroborates this. At that point, the board should have gone back to basics—to purpose, values and strategy—to find out what was going wrong and to make some serious adjustments. However, it appears that the company simply tinkered around the margins (while the patient was dying).

    Other boards should take note. Boards need to set strategy, and they need to review business performance against strategy on an on-going basis, to determine the appropriateness of the strategy. To do this effectively, boards need to understand the business of the business they are responsible for. They need to understand the market, the competition and the emerging trends, lest they get blind-sided by competitors, completely disruptive technologies, or, more simply, a change in buyer preferences and behaviours. On the evidence to date, the Postie Plus board does not appear to have done these things—or if it has, then it has not done them well. It is little wonder that the Postie Plus business has unravelled as it has.
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    Former directors cut a deal, without admitting liability

    Governance Leadership Management Performance Societal Wellbeing
    The former directors of failed finance company Strategic Finance have successfully negotiated a deal that sees them avoid civil or crown action against them, so long as they uphold some binding commitments made as part of the deal. The $22m settlement sees the directors avoid further court action in return for making a significant payment and promising not to act as a director, CEO, CFO or promoter of a public issuer for several years.

    The deal was made with the Financial Markets Authority and the Strategic Finance receiver, PwC. Interestingly, the fine print includes a line "without the regulator's approval", which suggests that any of the directors could, if they wish, mount a case to obtain permission to act in one of the roles for which they are now disqualified. 

    This is an interesting outcome. It enables the directors to avoid any form of conviction or detention. In effect, they are free to carry on their lives, albeit within the constraints of not performing certain roles. I doubt that would be too much of an inconvenience for the gentlemen concerned. However the investors lose 85–95 cents of every dollar they invested. The sounds like a deal in which there are a few winners (the directors) and many losers (the investors). I understand the deal has been done, but how fair is this type of outcome?
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    Deloitte partner does boards and governance a disservice

    Governance Leadership Management Performance Research
    From time to time, I read newspaper articles and get annoyed. When I read this article, published today in the Dominion Post, the hairs on the back of my neck stood up. Do you notice anything odd or misleading? The article is easy to read and very accessible. The title is compelling, and the information is seemingly helpful. However, aspects of the article are poorly researched and, quite frankly, the suggestions do boards, owners and governance a disservice. Bill Hale, a partner at Deloitte, should know better. Allow me to explain, using one of the ten traits for business growth mentioned by Hale:
    Governance - A well-governed company is one that is under ‘adult supervision' - the founders are surrounded by people who have ‘been there and done that' before.
    Actually, this is not governance at all. This description perpetrates a serious misconception. Boards are not minders or coaches and governance is not a mentoring service, although many boards behave this way. Individuals directors or external advisors may perform these roles, but not boards should not. The concept of a board was established as a result of the separate of ownership and control—when absentee owners (investors, if you will) needed something to represent their interests and achieve their purposes. A seminal article, written by Berle and Means in 1932, makes the case very well. The board is an organisational-level structure: the purpose of which is to influence the achievement of performance outcomes, in accordance with the wishes of shareholders. Boards are responsible and accountable to the owners. Further, they are required (by law, in New Zealand, at least) to act in the best interests of the company.

    Can I suggest that corporate governance is actually a mechanism, through which business performance outcomes are achieved. Governance is not some structure or process as many (including Mr Hale it would seem) suggest, and the terms 'governance' and 'board' are not interchangeable. The activities and actions of boards (what they do), including setting strategy; making decisions; monitoring performance; and, hiring the CEO (for example), are processes—events that occur over time. Further, companies are made up of people, and people make choices. Consequently, the desired results—revenue growth in the case of the companies mentioned in this article—may or may not occur as a result of governance interventions, despite the best intentions of boards and managers—or anyone else that wishes to contribute.
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    Postie Plus: now in administration

    Governance Leadership Management Performance
    Despite tough trading and assurances of an improved future, Postie Plus on the ropes. It appears the die has been cast for the once strong retail business, with the announcement today that an administrator has been appointed.

    I suspect this sad tale will make a very interesting case study for an MBA class or a governance researcher in the months and years to come. It will be very interesting to learn whether the board had full visibility of the situation; what it was doing about it; and, why assurances of an improved future were provided as recently as two months ago. However, answers to these questions can (and should) wait until the dust settles. Jobs and livelihoods are on the line. The administrator needs space to work out what has gone wrong, and to tidy up what looks like a rather messy situation.
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    What's up at Postie??

    Governance Leadership Management Performance
    Things are not going well for struggling clothing retailer Postie Plus. They have just called a halt to share trading, pending an announcement. In April, the listed retailer was under threat of suspension for not filing it's half-year results within the required deadline. Back in December, the board got a grilling at the company's annual meeting. 

    Clearly, something is not right. Is the board active and acting in the best interests of the company, or is it simply asleep at the wheel? The former is hard to swallow given the evidence of late.