Editor’s Letter : The Balance of Power

I think I’ve watched too many American programmes where the chair of the board, dissatisfied with debate, leaps from their chair with casting vote or veto. The room falls quiet and the matter is concluded. Just like that. The chair’s decision is final and no correspondence will be entered into. It’s all very dramatic but is it what actually happens in our part of the world? Our cover story this month looks at the balance of control on boards and asks what style of leadership is expected from chairperson, as more and more is demanded from boards and accountability and scrutiny rises. Our laws offer chairperson no more power than any other director – indeed the Companies Act says that even having chair is optional. See page 70 for the full story.
Looking beyond the appropriate level of chairperson power, we review the role board evaluation plays in boosting company’s success. Board evaluations, based around recognised best-practice models, are widely seen as an important method for developing better corporate governance, so what methods work best. We report (page 78) on the three main types of evaluation processes: the consulting-based evaluation, the web-based evaluation and paper-based evaluations. Each has its pros and cons, but the clear message is that all boards should strive for improvements and developments in governance and that director evaluation plays large part in achieving this.
Right, so we have the balance of power issue addressed and have shown the benefits of board evaluation, our third Director feature looks at conflicts of interest for directors. The article’s premise is ‘what is common sense guide to conflicts and disclosure?’ Is it as simple as telling directors to ask if they could positively defend their position during the heat of nationwide media interview – the so-called Paul Holmes test? Or should the reliable, practical guide be the ‘4 Ds’: disclose, discuss and, if still in doubt, desist? Experience suggests combination of both would provide straightforward framework for good practice. All is revealed on page 76.
This is the final issue of The Director for 2008. It will return in NZ Management February 2009. I hope you have enjoyed this year’s governance coverage and we look forward to bringing you more next year.