The Director : PROFILE Gary Paykel – Chairman of a harmonious board

Forget all the talk about healthy tension between board, chair and CEO, or the reports about the merits of adversarial attitudes between board and management. Gary Paykel, chairman of the board of Fisher & Paykel Appliances Holdings, won’t have any truck with that kind of talk.
“In Fisher & Paykel’s culture there is no place for that type of tension at all.”
Mind you, this is man who has held numerous roles in the 44 years he has been with the company, and company that has long history of melding board and management roles at the top. His father Maurice Paykel took over as chairman and managing director when Sir Woolf Fisher died in 1975, though he did subsequently relinquish the MD role to Don Rowlands. Gary Paykel in turn was managing director and chief executive, just as John Bongard, his successor at Fisher & Paykel Appliances Holdings, is now.
There was some tension on the board in the “Equiticorp days” he concedes, as he darkly refers to that period in F&P’s history when Equiticorp (in 1987) bought 23 percent of Fisher & Paykel’s shares. It was unlikely that Equiticorp’s “short term opportunistic business philosophies” (the words of Philip Yates, another whose company suffered at the hands of the 1980s’ corporate raider) would ever sit comfortably with the F&P board – and just as well that on its spectacular collapse less than two years later Equiticorp’s then 30 percent holding was able to be placed with “friendly investors”.
Aside from that aberration, board and management, separately and jointly, work and have always worked, as team. On the board, says Paykel proudly, there has never been dissenting vote.
However, that doesn’t mean an acquiescent board, or the subjugation of either board or chief executive. Rather it stems from the F&P culture and the importance the company places, from the factory floor up, on the importance of teamwork. If there was tension between the board and management, says Paykel, “how would you get things done? And where does that place the executive?”
He believes the chair and chief executive together have responsibility to build in the board an understanding of the issues facing the company. The CEO clearly handles day-to-day matters. As chairman, Paykel sees his role as ensuring that all the governance issues, “which are so important these days” are covered, “and that as board we stay on track creating shareholder wealth. And the way to do that is support the executives, because after all, day to day, they run the company. The board doesn’t.”
Not that such support is given blindly. Another tenet of Paykel’s philosophy is that board members must understand the business, not just the governance of it. He has deliberately – and frequently – turned down invitations to join other boards. “I don’t know how you can be board member unless you have deep and intimate knowledge of the business.”
It takes time, he says, for any new members (not that F&P has had too many in recent years) to get up to speed “on the level of knowledge that I believe is required to be an effective director of this company”.
It’s because of his insistence on the need for board members to fully understand the company and its markets that Paykel is sceptical about the value professional directors can deliver. He believes the days of professional directors, who hold positions on number of boards, are numbered. “I think they are particularly brave – or very trusting.
“Even with capacity to absorb all the information required, if they are not intimately involved with the company, they are unlikely to be fully conversant with the technological, design and marketing issues the company will face both here and internationally – and all the information they absorb is after the event, not before it. To me, that’s critical difference.”
At Fisher & Paykel, while the board meets monthly, Bongard and Paykel meet, if only informally, on an almost daily basis. And they discuss and phone or email relevant news to all board members as soon as they are aware of it. At the same time, decisions are not made on the whim of the latest news.
That’s something Gary Paykel learned (among many other things) from the late Sir Woolf Fisher. His perspective on the decision-making process was that you don’t rush in and make decisions if you don’t have to, says Paykel. “Give it time and make the decision when you have to make it, because it may be quite different from what you originally thought.”
In the interests of involving board members in understanding the background to decisions they make, Paykel encourages presentations by management to the board, and all board members visit all the company’s manufacturing facilities at least once year.
While F&P is “always on the alert” for good new board candidates, it is unlikely they will come from the ranks of professional directors. “I’d much rather have practising CEO who’s allowed to take up one board appointment.” Ralph Waters is current case in point: not only is he chief executive of Fletcher Building but he also ran Email, F&P’s main opposition in Australia.
Prospective new board members, in Paykel’s book, should have run their own business, or been senior executive or CEO in business, so they come to the board table with “the fundamentals”: an ability to read the accounts and understand agreements. “But then they have to get themselves up to speed with what appliances and healthcare are really about.”
Board members are also expected to have long-term vision – and the nerve to support what to many would be frighteningly long product development times; eight years and $34 million “before there was dollar of return” for the dish drawer, and over 12 years for Healthcare’s foundation product, the respiratory humidifier. “If this company had board fixated on quarterly results, we’d be broke,” says Paykel bluntly.
Paykel stands by his statement at the last AGM that good board should collectively encompass “wisdom, commonsense and experience”. It’s not very specific, he concedes, but it covers it; they need to have the company’s and shareholders’ best interests at heart, to have an understanding of the background to any initiatives, and to bring to the decision-making process “a good deal of knowledge and experience – and that’s commonsense and wisdom, after all”.
For many board members, and for those who move into chairmanship, there is sometimes difficult transition from management into governance. Not so for Paykel. He had been on the board since Fisher & Paykel went public in 1979, and had most recently been CEO and managing director.
His transition to chairman had been four years in the planning, as part of the split of the single company into Fisher & Paykel Healthcare Corporation and Fisher & Paykel Appliances Holdings. “I wanted to step out of the CEO’s shoes at the age of 60. This was the perfect vehicle to do that. I don’t believe chief executives should be around too long, whatever ‘too long’ is. We had two very very effective people [Mike Daniell – Healthcare, and John Bongard – Appliances] ready to run each of the two companies.”
Paykel claims that, possibly unlike many chief executives who step down, he didn’t miss the day-to-day involvement with the company. “I’ve had lifetime at Fisher & Paykel in number of roles, in whatever form Fisher & Paykel was at whatever time, and with the chairmanship, I still had tremendous insight into the two businesses.”
It’s probably helped that, in line with F&P culture and its respect for experience and continuity, John Bongard has allotted his chairman an office just across the corridor from the senior executive team’s large, open-plan space, and Paykel retains informal day-to-day contact – though not on day-to-day matters.
“I said to both executives at the time of their appointment that I would not comment on day-to-day matters unless I was asked (and certainly I’d give an opinion then)… But I don’t comment.”
Although, he jokingly adds, “I’m learning to