NTHC- Why you lost your Board and CEO: Reasons and Future Implications
Beneficiaries have reason to be concerned about the rash of resignations in mid 2006, and further, the quality of information released to enable understanding of the changes in their organisation. The only information freely available to us as beneficiaries is contained in the May and June issues of Te Panui Runaka (here). The following is a personal account of how I saw events unfolding.
The Resignations:
The Chief Executive of NTHC Robin Pratt, resigned in early May 06. The NTHC Board consisted of 8 directors – 5 of whom were independents and 3 being Ngai Tahu. At the end of May two NTHC directors were asked to resign by the NTHC Board for breaking board confidentiality. On 14 June I resigned along with Jane Huria. Three other directors followed, Maika Mason, Sue Sheldon and Trevor King, leaving Ross Keenan as sole remaining director.
Two major factors have underpinned the success of NTHC. Firstly, ability to attract and retain professional directors and secondly, a good Chief Executive. Wayne Boyd, now Chairman Telecom New Zealand, sat on the Board for eleven years (four of these as chair) before resigning in July 2005 at the end of his tenure. Ngai Tahu was very fortunate to have a man of that calibre sitting on its Board.
TRoNT has a poor record in its dealings with its subsidiary boards and Chief Executives. The first CE of NTHC, Brian Kennedy left in 2001 over TRoNT’s intractable stance about his contract. The Ngai Tahu Development Corporation’s (the former development arm) CE and board were disestablished because Tront failed to provide any strategic direction.
The latest resignations occurred in an already sensitive period for Ngai Tahu with the triennial Kaiwhakahaere elections tensions and unauthorised leaks around these.
A governance review ( see here for a summary of the and the new struture being propsed) was also being undertaken at this time. Board members were aware of this, and had made individual contributions to it. In April we had been briefed on the review’s progress and further comments were being prepared. The reviewer, Garry Diake, had commented very favourably about the Board and management of NTHC.
The Governance review proposed changes to Ngai Tahu structures which were to change the CE’s role in the organisation. These changes were announced as a fait accompli to staff of the office of TRoNT when some of Robin’s own staff were present. His position was untenable, and on 11 May, Robin formally resigned as CE of NTHC. The NTHC Board, after seeking legal advice, had no option but to accept Robin’s resignation. While the Board set about finalising Robin’s departure and putting in place measures to cover his departure word leaked out about the resignation.
On 24 May an email was sent by Tahu Potiki to the Board seeking information about Robin’s resignation for Tront saying that he needed to get answers – “Otherwise I will have no option but to report, and make recommendations, on the basis of the information I currently have”. The Board’s response was that it was an employment matter and confidential to the Board.
On the same day a copy of an email was NTHC from “The Press” asking for comment. The email (here) is from Tahu Potiki to his advisor, “Peter” It had also been sent to the “Otago Daily Times” and the “New Zealand Herald”. The Herald and the Press picked up on Tahu’s email and also the press release announcing Robin’s resignation. In it, Tahu was critical of Mark Solomon and made various other statements. The release of the email was not without timing, coming three days before the Kaiwhakahaere election. Tahu himself did not forward the email to the media. This was done by James Daniels, a candidate for the Kaiwhakahaere election who claimed, later, the email was sent by mistake. But it seems strange that if Tahu was genuinely seeking advice, that he should send his email to an election candidate. The role of CEO is to always act impartially in all matters.
What Tahu Potiki’s email revealed was that two NTHC Directors, Linda Constable and Mark Tume had spoken to Tahu about Robin’s resignation. This was a clear breach of board confidentiality. Constable and Tume between them hold a number of directorships, Constable; Orion NZ Ltd and New Zealand Railways Corporation Ltd. Tume; Transpower New Zealand Limited, and Guardians of New Zealand Superannuation. Both would have been fully aware of the need for confidentiality. The remainder of the NTHC Board therefore lost confidence in them and asked them to resign on 29th May,which they both agreed to do.
Whether TRoNT accepted their resignations is not known, because they were both reinstated as directors on the new NTHC Board. They joined Ross Keenan. Ross a highly experienced director with particular tourism expertise did not resign. His presence on the new Board will provide much needed continuity and wise council.
The Kaiwhakahaere elections had taken place on 27 th of May and Mark Solomon was re-elected although it was a 9-9 split vote. The factions within TRoNT were led by Mark Solomon on the one hand, and Te Marie Tau. But Mark, as the incumbent, retained his position. Prior to the election there were hopes expressed of putting factional differences aside and unity at TRoNT. These hopes were to be short lived.
Two weeks later, on the 6th of June directors received a letter from Mark Solomon containing a list of issues concerning Robin’s and the directors’ (Constable and Tume) resignations and expressing a wish to meet to meet directors individually. On the same day a media report illustrated that Tront were far from unified. I, and other directors, replied to Mark saying that we could not say anything because the two issues were Board confidentiality matters.
TRoNT met, in committee, on the weekend 9-11 June 2006 and in committee resolved to disestablish the NTHC board. Their reasons were twofold:
-First they were given a legal opinion that the NTHC Board should have told Tront the reasons for Robin’s resignation. This seems to me to be extraordinary advice. Standard commercial practice would recognise that these were human resource issues, and as such, confidential between an individual employee and a board.
-Second, they had lost confidence in the NTHC Chair Maika Mason. Apparently Maika had been failing to pass on instructions from Tront. Surely that could have been resolved, much earlier, simply by telling other board members that there such issues had arisen.
Mark Solomon and Maria Pera, representing the two factions within TRoNT, gave varying reasons as to why the Board was to be disestablished, and why all resignations were accepted. TRoNT did not believe the NTHC Board could return to a “collective unity”, TRoNT was “not confident in the leadership” and did not believe there was “stability”. TRoNT’s formal or public explanation for the resignations is explained to beneficiaries in the May and June issues of Te Panui Runaka (here), in a media statement and published in The Press (see here Press clippings). These contain more form than substance, and in my opinion give a distorted, albeit soothing, version of events to beneficiaries.
What happened, I believe, was that dealing with the NTHC issues galvanised and unified Tront for the first time in months. “Groupthink” is terminology used to describe the mode of thinking that people in teams or groups engage in when agreement-seeking becomes so powerful in a group that the group tends to perpetuate or reinforce factional ideas, discourage dissent and to suspend critical appraisal of possible alternative courses of action. I believe this is where TRoNT has been in recent times. The opposing factions within TRoNT, which has caused the group to become impotent, have accepted rumours and half-truths about many issues uncritically and without dissent.
A couple of weeks after the resignations TRoNT met only to realise their own problems in functioning as a unit remained and compounded with another set of problems.
Questions
The questions we beneficiaries need to be asking are:
-Did TRoNT act reasonably and in the best interests of Ngai Tahu whanui, as all TRoNT representatives are required to do? See (Charter Extracts) – for extracts from the Ngai Tahu Charter. Did TRoNT act reasonably as they are required to? “Reasonable” is used and applied in law frequently.
Many laws employ the “Reasonable Man”* a fictitious person who -exercises care not to harm others. To the reasonable man some truths are self-evident. The reasonable man knows the difference between direct facts and imagined conjectures or speculation. — He acts responsibly to others and to himself. – he is required to act in a way that will not adversely affect the welfare of others. He exercises due diligence (*the care that a prudent person might be expected to exercise in the examination and evaluation of risks affecting a business transaction) to ensure that his acts (including his words both spoken and written) do not harm others.)
* Juris Dictionary **Merriam-Webster’s Dictionary of Law
Do we, as beneficiaries believe that members of TRoNT have been acting ‘reasonably’?
Implications
-What advice was TRoNT given or sought on the risk of their actions towards the NTHC Board, and who gave it?
-What advice was TRoNT given or sought about the ongoing commercial implications of the resignations?
We as beneficiaries need to reflect on the implications of these actions. To match the questions above we must ask:
-Did Tront itself consider the implications of their decisions? Some of those that come to mind are:
1) The loss of credibility and ability to recruit and retain top quality independent directors and a high calibre Chief Executive? Who would put their hand up for any of these positions with the very real prospect of being ousted at the whim of the political council?
2) The lack of good commercial governance leading to the very real prospect of diminishing financial returns? NTHC was set up separately and structured the way it was to utilise the best commercial advice to increase dividends for beneficiaries and tribal development. Best commercial practice needs to be free from political interference.
3) Ngai Tahu has been perceived as an enduring, successful and stable South Island commercial force. What the NTHC Board and CE bring to the wider organisation are opportunities, contacts, partnerships and prospects with other significant organisations and people. Recent events have damaged this image. It will take a considerable time to retrieve this reputation.
So what can we do so this sort of event does not occur again? If you have not already done so have a look at my suggestion (here) on Tribal Democracy. This might be a start point.