Alison Paterson: Grande dame of governance

There are some contentious boardroom practices about which New Zealand’s grande dame of governance, Alison Paterson, is adamant – issues such as diversity in board composition, shareholders’ ownership rights and the imperative to grow value.
There are other matters about which she is less inclined to die in the ditch. But all this outwardly demure and inwardly disciplined and determined woman’s opinions have been forged in the heat of 30-something years of governance experience.
Successful board leadership is not about being ‘an island’, she told around 800 of her peers and senior executives at last year’s Deloitte/Management magazine Top 200 Awards dinner when she was named the QBE Chairperson of the Year. It is about “getting the best out of the [board and senior management] team, appointing the right chief executive, listening and, treating people with respect”.
Paterson is an obsessively hard working and fanatically client-focused accountant: traits for which she makes absolutely no apology. She built her own highly successful rural practice in Taumarunui in the 1960s and ’70s by working long hours and taking few holidays. Then things began to change. She was, all of sudden, the first woman appointed to public listed company board, retail chain McKenzies, and landed her first government body directorship on the Apple & Pear Marketing Board in 1976.
Last year’s Top 200 Award judges called her “an outstanding leader”. She is, they said, “dedicated to best practice governance, forging partnerships with chief executives and other board members” and, they added, “she is prepared to make tough decisions and big calls” when she considers it in shareholders’ interests to do so.
Paterson has now served on an impressive portfolio of public and private sector boards including the Reserve Bank, Wrightsons, Landcorp, Waitemata District Health and, of course, Abano Healthcare where, as chair, she has polished her gilded career. She is, at 75, still working hard but admits that she now takes time out to travel and consider, more effectively display and, from time-to-time add to, some of the magnificent art work that adorns the Remuera home she shares with her husband former High Court judge, Barry Paterson.
So what, on reflection, are the leadership lessons Paterson has learned? And how does she view the future of governance? Her response that organisational performance is “about team effort” is less an ‘ah ha!’ revelation than an experience-based endorsement of what best practice advocates hold to be both universally true and self evident.
But that, of course, is her point. Chairs must build strong governance teams that work effectively with senior management. They often pay too little attention to this critical task. Her acceptance speech comment that “no man – or woman – is an island” reflects her entrenched belief that only effective teams can deliver the goods, particularly in today’s highly competitive and increasingly complex business world. There is, says Paterson, “no room for board of big egos”.
The right chief executive is critical to the team-building process. “Getting the choice of CEO right is still, to my mind, the most important thing board does,” says Paterson. “And if the appointment is wrong, the board should act as quickly as possible to rectify it. Chairs need to be more skilful when effecting [this sort of] change,” she adds.
Her belief in the effectiveness of team approach to governance seems rooted both in her business experiences and her personal life philosophies. Her most influential role models were her mother and her grandmother – both hard-working housemaids “accustomed to serving other people”, she explains. “Energy,” she adds, “is capital” and therefore, not to be wasted. It follows that contribution is measured in terms of value added.
Paterson accounted for most of her working life in six-minute charge-out units. But as demand for her accounting skills and business knowledge increased so too did the invitations to join more and bigger boards. Her interest in governance grew and, given her husband’s high-level legal career, the transition from chartered accountancy to career as professional director “allowed the two of us to pursue our respective careers”, she says.
Governance has “changed and grown” since Paterson took her first seat at board table. No more so than in the way in which directors must treat employees, particularly their chief executives. Her first experience of board that, without warning, sacked its CEO was sobering one for her. “That could not happen today,” she adds. “It would cost fortune in constructive dismissal compensation. Things have unfortunately gone to the other extreme. The dismissal processes are now so complex and fraught that they can seriously impede an organisation.”
An upside, perhaps, of the changed employment rules is that the financial consequences of employment contract mismanagement are so high that “directors are more conscious of the need to build and maintain the effective collaborative relationships that should exist between board and the CEO”, reasons Paterson.
Political agendas were, she believes, at the heart of the US sub prime and property lending fiasco – the promise that every American family would own their own home. And worldwide, lenders underpriced risk. The consequence was the explosion of creative financial instruments which delivered the scale of the GFC. She does, however, concede that “poor governance failed to understand the instruments created, the extent and the magnitude of the risk assumed”.
And, she adds, the US-conceived Sarbanes Oxley approach to governance regulation introduced following the Enron and other massive corporate swindles of the late 1990s and early years of this century, did much damage because of its compromised tick-the-box approach toward measuring governance performance and compliance. “In New Zealand it [regulation] is more substance over form. And while we can’t use the words ‘true and fair’ when reporting any more, it is more about that than about sitting around ticking boxes,” says Paterson.
Boards exist to “challenge, debate and draw the best out of organisations’ senior management teams”, she says. “The board’s objective should be to get the best possible thinking and results from full, frank and constructive conversation and consideration of management recommendations. Directors must be as good as, or better than, the management team by having both industry knowledge and mix of skills appropriate to the company’s condition.”
If the governance model has any weakness it comes from having too many under-achievers on board. “Too many egos, too much vested interest and, though my husband hates me using the expression, too much testosterone around the table can all be dreadfully destructive,” Paterson says. “A good board will listen to range of opinions and then make good decisions based on the best evidence available. bit like judge really,” she adds.
Directors’ individual capability and ethical work standards are, in her experience, what deliver organisational performance and success. “Board composition is critical,” she says. “There should not be anyone on board who does not make worthwhile contribution to the discussion. Boards need intellect, sector understanding, firm grasp of balance sheet fundamentals, an understanding of what drives growth and directors that can think strategically. You need widely experienced senior people who have been at the coal face for long time and who have seen lot of things happen. Boards also need people with courage.”
So how does she feel about the repeated call for diversity in board composition? “Many of the calls for diversity are rubbish,” Paterson says unhesitantly. “Seeking ethnic or gender diversity for the sake of it is nonsense. Experience and performance counts most. I do not believe I was ever offered directorship just because I was woman. I earned my stripes by work