A US perspective on Corporate Governance Issues for New Zealand Companies
Mark Canepa is currently Chairman of the Board of Directors of GreenButton, a company founded in Wellington that specializes in Cloud based middle-ware. The board is international with a mix of NZ and US based directors. Mark is based in the US where the company has opened an office in San Jose, California.
Following a recent trip to San Francisco, Mark talks to Henri Eliot about corporate governance for New Zealand companies in the United States.
What is the role of a board from your perspective?
While the details may vary somewhat based on where a company finds itself it its lifecycle, the primary role of a board is to represent the best interests of shareholders in creating long term value for their investment. This involves having clear strategic objectives in place for management to execute and a clear review process to insure management is executing properly. The three words I’m most fond of speaking time and again are “Focus, Discipline and Execution”. Companies need to “focus” on doing a few things exceptionally well. This requires a very high level of “discipline” to stay on the path and not be distracted. The ultimate goal is to “execute” and deliver the promised results.
The board also needs to look far enough in the future to challenge management with “around the bend issues” which may not be clearly seen by management in the day to day battle to deliver results. Additionally the role of the board is to offer input, advice and coaching to management based on their particular areas of expertise. This is particularly true in the start-up and high growth stages when the CEO may come from a particular area of expertise and may not have seen all of the multifaceted aspects of running an organization.
Looking forward 5 years, how do you think the board dynamic will change?
The board’s primary role is not likely to change during the next 5 years. It will still be about creating and delivering long-term shareholder value. As far as dynamics are concerned, they mostly change as the nature of the company changes. At each stage of its lifecycle the dynamics take on characteristics specific to that point in time. Director’s core capabilities may need to change as the company face new challenges. Typical inflection points may come during transitions from Intellectual Property creation, to revenue generation. Entering new markets or new geographies may also present new challenges which will drive board dynamics.
How will the next generation of board members differ and operate?
Boards need to recognize the landscape a company operates in changes over time. Some of the changes come from purely market forces. In this case the board needs to recognize the need for a balance of experience and novelty and not be afraid to bring on board younger individuals who may provide a different perspective of how market forces are like to shape the future. However in many part of the world there are variables at play that go beyond pure competitiveness. Social and governmental forces may force companies to operate to additional rules beyond those driven by purely competitive forces. Boards need to recognize these changes in advance and insure at both the board and at the management level that the company is prepared to deal with these challenges.
How are we preparing the next generation board member for the future?
I’m not aware that there is a clear process in place to prepare the boards of the future. Unlike management preparation where there are a wealth of experience and role models to fall back on, there is little in place to prepare one to be on a board of a for profit enterprise. Typically senior management gets exposure to their board and can learn a great deal by seeing how their own board operates. I learned how boards operate by having been a senior executive in a Fortune 500 company and then by being CEO of midsize public US Corporation. Once a board member, in the US at least there are short courses and seminars available to expose individuals to particular topics of interests.
What gives you the most sense of achievement on a board?
The obvious answer is to see shareholder value being created. That is why you are there. To me though in close second place is to help, watch and see management grow and flourish and coach the team so that one day they can take on this task. It is very gratifying to me to be able to pass on a lifetime of accumulated knowledge to a younger newer team.
Final word or comment on corporate governance?
Governance is an all-encompassing activity of insuring the long-term success of the company. It requires understanding all of the forces surrounding the organization and insuring that management has plans are in place to deal with them successfully. It is about setting direction, expecting accountability and demanding execution.
Henri Eliot is chief executive of Board Dynamics, a consultancy company which provides strategic advice to directors and boards throughout New Zealand and Australia.