Movements in the Long White Cloud of Governance -Shifts in Attitudes to Governance in New Zealand

• Main Author: Mueller, Jens Helmut Friedrich
• Language: en
• Published: University of Canterbury. Management 2014
• Subjects: Governance; Leadership; SME
• Online Access: http://hdl.handle.net/10092/8963

This research interrogates a large population of shareholders, senior managers and company directors in New Zealand as to their reasons for considering board service, their competence in governance skills areas, their beliefs as to whether board room diversity is needed and their firms’ interests to recruit further independent directors to their boards. With a considerable deference to the contributions of agency theory as the conventional cornerstone to explain the connection of directors into organizations for the purpose of governance service, this work explores the extension of agency theory by adding an additional driver for governance engagement by company directors: Commitment. Based on this research, company directors in New Zealand appear to base their interest in serving as independent directors on company boards largely on the desire to “do good”. This raises the prospect of a deeper and more meaningful relationship with firms where they serve as directors. Ignorance of this important component of the director/firm relationship by the firms might render directors less willing to contribute and deprive firms of the strong support and engagement of their directors. Lack of recognition of this additional component to the fabric of an enduring committed relationship between external directors and their firms may require a different behavior of firms during the recruitment, board induction training and maintenance of the director relationship. While the strong expression of interest by SMEs in additional independent directors is a welcome sign of rising governance standards in New Zealand’s large group of such enterprises, concern emerges about the potential lack of competence by directors in several areas of governance. While directors appear to compensate for deficiencies in skills with an extra dose of commitment, significant needs for upskilling exists in this sector. It is noted that the absence of well-established, easily accessible and comprehensive director training schemes in New Zealand conflicts with the expected large number of additional independent director recruitments in the near future. Shareholders, senior managers and directors report a need for diversity on boards in the area of business experience, but no specific concern is expressed as to how any specific importance of gender or age while other factors, such as work experience and global knowledge, are of much greater interest. This could indicate that the status quo of only a small number of women on boards in New Zealand is accepted, but in the context of this work more likely indicates that directors will not be recruited (or excluded from recruitment) in the future on the basis of gender. This research attempts to lay groundwork for a more intensive investigation into the true motivations of company directors when they think of an independent director mandate and while they discharge directorship duties. There now appears to be solid evidence that the historic application of agency theory does not completely describe the factors of motivation and relationship under which independent directors serve on company boards.