BOARD TALK : Phillip Meyer – Boards aren’t that bad

New Zealand boards are, generally speaking, making “good fist” of their response to the economic downturn, says Phillip Meyer, chairman of the New Zealand Institute of Management’s National Board and director of seven other boards, including Southern Cross Healthcare and Kordia.
He attributes the generally good awareness of the recession and understanding of what needed to be done to counter its worst excesses, to the country’s delayed entry into the cycle. “We were aware of the recession in the rest of the world before it hit us,” he adds. “That heightened our level of understanding and consequently boards started considering the downside risks before the recession really manifested itself here.”
Now the downturn is encouraging boards and management to review their strategies. “The circumstances have changed so much that I see more boards re-thinking their strategies on more regular basis, say six monthly,” says Meyer. He also feels that boards and management are working together better to find solutions to recession-induced problems as well as to identify new opportunities. And that trend is, in his opinion, beneficial by-product of the economic downturn.
The priority now, however, is for boards to focus on capital management. “We are not blessed with surfeit of capital in New Zealand and that constraint inhibits growth.” And even though interest rates have dropped, business can’t grow its way out of trouble by using excessive debt. “Capital is major constraint for New Zealand companies and for boards looking to grow their businesses.”
A capital constraint notwithstanding, Meyer quotes recent survey of directors of trade-focused enterprises which suggested that the majority of them, 73 percent, expected their organisations to be both more innovative in the coming year and were similarly looking to re-invent or re-position their companies for the future.
He does not, however, expect to see this refocusing result in any significant changes in either board or management leadership in the organisations in which he is involved. “And I don’t expect to see many changes happening at the top of most other enterprises,” he adds. “It is more about the board and management saying look, we are in this together and we want to throw the best thoughts at it that we can and give it the best rigour so that we are best positioned [for the upturn].”
In Meyer’s opinion, the boards of most of the country’s corporates are performing reasonably well and spending time, money and effort on developing their directors to cope with the exigencies of today’s tougher business climate. The same can’t be said of small to medium size enterprise boards however. “There is great need for more director training in the SME space,” he adds. But he concedes this is not an easily solved issue.
Having said that, Meyer believes directors are becoming more professional and committed to developing their individual competencies. And as an Australian who has been working as director in New Zealand for almost eight years, he thinks Kiwi boards and directors hold their own against their trans-Tasman counterparts.
“From my observation, New Zealand boards are every bit as professional as Australian boards,” he offers. “And in many cases I see higher level of professionalism [in New Zealand]. I think directors here ring each other if they have an issue to resolve or discuss. There is extra board communication that seems to work in New Zealand that I am not aware happens in Australia. I think that is positive. It is probably to do with it being smaller country. In Australia the relationships are more formal and consequently there is less communication between board meetings.”
And on global scene, Meyer thinks New Zealand directors and boards are as professional as any he has encounterd in any other country in the world. “The difference is that our world view is smaller,” he adds. Consequently, there is greater resistance to “going global” with business opportunities.
While he believes Kiwi boards and directors are professional in what they do and how they direct their organisations, he wants them to put more effort into their strategic thinking. He suggests workshop approach to developing and discussing strategic options.
“I think there is value in throwing something onto the table without whole lot of papers and without putting management to lot of preliminary effort. Directors are generally wise and experienced enough to discuss concepts and reject or accept them without huge initial effort,” he explains. “We can pick up on ideas and get management to do more work on them if we think the idea has legs.”