Company directors must deliver more than increased shareholder returns. They should be good corporate citizens too, says former Port of Tauranga chief executive and now equally potent professional director, Jon Mayson.
Mayson stepped down last year as chair of New Zealand Trade and Enterprise. He’s recently stepped up to head the Wellington-based technology group Fronde Systems’ board, among several others.
Ever the thoughtful and outspoken liberal, Mayson is determined to ship his “heart and soul” leadership approach from his executive suite experience to the boardrooms of as many companies as will welcome him. Directors must, he says, rethink their responsibilities and priorities to survive and thrive in the increasingly stormy seas of social discontent created by the shareholder first and only doctrine.
NZ Management magazine last interviewed Mayson back in 2002. His attitudes toward governance and shareholder rights were already formed. He believed then, and still does, that loyalty, consistency and stakeholder interest is of greater value to an enterprise than “transient shareholders who bring nothing of value to an organisation other than capital which they more often than not proceed to re-extract as soon as possible and at premium”.
Mayson now believes directors must re-set business’ moral compass. As it happens, his line of thinking is gaining increasing currency in more thoughtful corners of international business schools. “All successful businesses and organisations have two things in common,” he says. “They have absolute clarity of purpose and are iterative in the way they change [the business] with changing times.” And companies must underpin that approach with “a commitment to values which should not be eroded”.
Mayson planned to spend most of his post Port of Tauranga career consulting on port privatisation, at home and abroad. He did some work for the Asia Development Bank. But then came offers to join boards and he opted instead for life in governance. He also does some mentoring and lectures on leadership occasionally. More often than not he is offered the chairmanship of the boards he joins. Most of his governance work therefore focuses on leading organisational change.
His contribution as director is, Mayson thinks, wrapped in his ability to motivate and inspire people to accomplish things. He tries to create positive environment in which people can realise the potential of their talents. “Walking the talk around the values of an organisation is part of that process,” he says. “The chairman’s job is to help senior management create an environment in which people will believe in what the organisation is trying to do.”
After 12 years serving on many boards, Mayson doesn’t, sadly, rate New Zealand’s governance standards very high. Far too many directors fail to understand what governance is about, he says. And why is that? “Because the old boy network approach to appointing directors seldom brings the right people through,” he adds.
The Institute of Directors is, he believes, trying to lift director standards in New Zealand. The difficulty is that, despite the IoD’s accreditation scheme the companies and the professional head hunters they appoint fail to ask whether the individual being interviewed is an accredited director. “Until accreditation is considered an important and worthwhile credential, and until boards and recruiters insist on directors having the accreditation, it has no value,” he says, lamenting existing practices and the prevailing market reality.
His observations aren’t, he says, intended to denigrate those who have made the effort and spent the time to go through the accreditation system. “There are some fine directors in there who have been accredited.” Mayson admits he hasn’t made the effort, an admission he’s not proud of.
“I’m not accredited for the simple reason that I can’t see how it will add any value to the boards on which I now sit. And not one of them has ever raised the issue with me. Of course I should be accredited, but I don’t get around to it because it simply isn’t priority. As professional director I should have to be accredited to sit at board table,” says Mayson.
Governance standards won’t, in Mayson’s opinion, improve much until boards become more professional about the way they recruit directors and brief their employment agencies. “Mates of mates get on boards and they are invariably the wrong people,” he says. “Most of them are, in my experience, risk averse and generally more interested in finding ways to increase the director fees than they are in doing anything for the company’s employees. Very few boards have any relationship with the employees of the businesses they are supposed to lead and direct.”
Notwithstanding his experiences, Mayson believes the existing governance model is still capable of delivering good organisational performance. But to do so, boards must be “agile and iterative” in their approach to governing. “Directors must be willing to change organisational structures to meet the needs of modern market,” he adds.
He acknowledges that the marketplace has changed dramatically over the past decade and particularly since the global financial collapse (GFC). “What has happened since 2008 is just the forerunner of far greater upheaval,” he warns. “The world economic system has run its course and we need to make massive changes. The governance model is, however, still valid to the degree organisations need to be governed. The question is whether the right people are governing.”
In the New Zealand context Mayson admits he is conscious of the shortcomings of his aged, pakeha, male credentials. The composition of New Zealand boards must, in his opinion, change to meet future organisational performance and relevance needs. “We need younger directors, more women on boards and greater ethnic mix in board membership. And boards need to recruit more enquiring minds,” he says.
Boards need directors with open minds, rather than closed and vested interest attitudes. “Our boards need to appoint directors with minds open to considering different ways of doing things. For example, we need directors who understand that sustainability is the key to the future of business,” he says.
“There must be whole new way of thinking about what it is that companies exist to achieve. We can’t generate infinite growth from finite world. I want to be proactive about changing the organisations I’m involved with. I don’t join boards to sit back and wait for change to be forced on us.”
Directors must, Mayson concedes, protect shareholders’ interests. But he insists that board’s responsibilities are broader than that: “Directors must look after the interests of all stakeholders.” For him, those stakeholders include the community in which the enterprise operates, the environment, employees, contractors and suppliers, and customers.
But of all governance travesties committed by boards in recent years, the one which seems to rankle most with Mayson is the way in which boards have facilitated and encouraged what he calls “corporate greed”, divisive and destructive trend facilitated by boards adopting and speciously justifying excessive executive remuneration policies and pushing up directors’ fees.
The growing disparity between remuneration at the top and bottom levels of businesses and other organisations is, he says, both symptom and direct cause of many social problems and negative economic outcomes. “Governance has played major role in creating and promoting social unrest,” he says.
Directors encourage this imbalance and justify their actions by arguing that high salaries and bonuses are essential to attract talented managers. “And directors also embrace this approach to drive up their own fees,” says Mayson. “In too many cases, the levels of remuneration demanded and paid are out of step