One of the issues raised by the Huljich Wealth Management controversy is the role of well known or celebrity directors, particularly former politicians.
Unfortunately some of these retired politicians make poor choices; they join companies that are soon enmeshed in controversy.
They may be flattered to be approached, but may not do proper due diligence and they may not understand the importance of being an active and diligent director.
As a result a large number of ex-politicians have been directors of companies that have destroyed substantial shareholder and investor wealth.
Before 1984, former politicians and political party hacks were appointed to the boards of state-owned enterprises as a reward for their loyalty. Few ended up on the boards of listed companies.
There were three notable exceptions: Jack Marshall and Bill Rowling, two former Prime Ministers, and Brian Talboys, a former Deputy Prime Minister.
Marshall was a director of DRG and Hallenstein, Rowling was on the board of Kingsgate and Hotelcorp with Talboys who was also a director of Genestock, Pacer Pacific and National Bloodstock. The latter three were all spectacular failures in the 1980s.
However, a large number of politicians have been appointed to listed company boards since the fourth Labour Government began privatising state-owned enterprises in the 1980s. The accompanying list contains most of these over the past two decades.
Wyatt Creech, a former Deputy Prime Minister, and John Luxton, a former Minister of Commerce, Housing, Energy and Agriculture, made poor decisions when they agreed to become directors of Blue Chip.
Creech and Luxton retired from Parliament at the 2002 election with the former joining the Blue Chip board in December 2004 and the latter three months later. Creech resigned in June 2006 and Luxton quit four months later, just after the company delisted from the NZX and moved to the ASX.
Blue Chip was a back-door listing through Newcall and directors, particularly former Government ministers, have to be particularly careful about accepting positions with back-door listings because they are rarely successful and celebrity directors are a blatant attempt to give these companies respectability.
Mark Bryers’ Blue Chip has been one of the most infamous back-door listings, mainly because of the huge losses suffered by investors who were enticed by its hopelessly flawed investment schemes.
On a positive note Creech had good success with the unlisted Open Country Cheese.
Brierley Investments was another company with a number of former politicians on its board.
Sir Roger Douglas was a director from October 1990 to March 1999, Fran Wilde from May 1995 to November 1998 and Philip Burdon from November 1998 to the present.
One of the problems with both Brierley Investments and Guinness Peat Group has been the composition of their boards, which have been dominated by executive directors and inexperienced external directors.
Brierley Investments went downhill while Sir Roger and Wilde were on the board, with shareholders voting in favour of a move to Singapore and Bermuda at a fiery meeting in Auckland on Armistice Day 1999.
This was one of Bruce Sheppard’s first high-profile appearances but New Zealand shareholders, who wanted to keep the company here, were outvoted by overseas interests.
Burdon is still deputy chairman of the company, which is now called Guocoleisure. He has also been on the PDL and Ebos boards and was a director of Air New Zealand when it nearly went under and had to be bailed out by the Government.
Lombard Group is another back-door listing with a number of former politicians on the board.
The company backed into Pure New Zealand in late 2005 and Sir Douglas Graham, a former Attorney General, and Bill Jeffries, Transport Minister in the Lange Government, joined the board shortly afterwards.
Hugh Templeton, a former Trade & Industry Minister, was a director of Lombard Finance, Lombard Group’s fully owned subsidiary.
Lombard Group has been a basket case since the collapse of Lombard Finance and this week shareholders approved the reverse takeover of the company by the insurance company Australian Consolidated Insurance.
Jeffries will become the new chairman but, based on experience, it is questionable whether a company – which has converted itself from Agland Holdings to Pure New Zealand to Lombard Group and into an Australian insurance group – will be successful in its latest reincarnation.
Sir William Birch, who led the flawed Think Big energy projects in the 1980s that cost taxpayers $7.4 billion, has also had problems in the private sector. He is chairman of Investment Research Group, which started out as Viking Pacific, and was a director of Dorchester Pacific.
On the positive side, Birch is a director of Freightways, the successful courier group.
Sir Michael Fowler, the former Wellington mayor, was a director of Robt Jones Investments and John Robertson, the former MP for Papakura, was a director and chairman of Sealegs from August 1993 to March 2008.
This was a particularly difficult assignment as the company changed from being a chicken farm operator in Vietnam (Iddison Group Vietnam) to an IT company (IT Capital) to an amphibious boat manufacturer.
One of the most disappointing directors has been former Prime Minister Jenny Shipley, who has been on the Richina Pacific board since April 2004. She was supposed to open doors for the company in China but there is little evidence of this.
She is also a strong defender of chief executive Richard Yan when there is really no defence for his poor performance.
Shipley also spoke strongly in favour of the delisting of the company from the NZX when this was clearly not in the best interest of minority shareholders.
In addition the proposed share buyback, which was used as an enticement to encourage shareholders to vote in favour of the delisting, has not eventuated although a number of shareholders have received special treatment and have had their shares bought back by Richina.
Ruth Richardson, the former Finance Minister, has also had little success on the NZX. She was chairwoman of Dairy Brands when it was spun out of Apple Fields.
The corporate dairy farmer struggled as an NZX listing and Judith Collins, the current Police Minister, was also on its board. Richardson is also a director of Synlait, which had to abort its proposed IPO late last year.
The three most successful former politicians, as far as listed company directorships are concerned, are David Caygill, Richard Prebble and Jim McLay.
Caygill and Prebble have had only one company each, Infratil and Mainfreight respectively, and McLay, who is now New Zealand’s Permanent Representative to the United Nations in New York, has always been extremely professional and diligent as far as his directorships are concerned.
Evergreen Forests was not a success but he did a good job as chairman of Metlifecare, Just Water and the management company of Goodman Property Trust. McLay has clearly shown that former politicians can make excellent company directors if they commit their energy, expertise and time to the role.
On the flip side there have been few individuals who have gone from listed company directorships to Parliament, although two stand out at present, Judith Collins and Steven Joyce, another Government minister.
Collins had little success at Dairy Brands and Savoy Equities, formerly known as Genestock, then Parapine Timber and Counterpoint Equities.
Joyce was a director of Radioworks, which was taken over in 2001, and was a successful chief executive and director of Jason Media Travel until he decided to enter Parliament.
Joyce is a loss to Jason Media Travel and will be welcomed back to the NZX when he tires of politics.
Former Politicians on NZX boards; More failures than successes
|Controversial / Struggled||Successful|
|Sir William Birch||Dorchester Pacific,
Investment Research Group
|Philip Burdon||Brierley Investments,
Air New Zealand
|Wyatt Creech||Blue Chip, NZ Windfarms|
|Sir Roger Douglas||Brierley Investments|
|Sir Michael Fowler||Robt. Jones Investments|
|Sir Doug Graham||Lombard|
|John Luxton||Blue Chip|
|Jim McLay||Evergreen Forests||Just Water, Metlifecare|
|John Robertson||IT Capital, Apple Fields|
|Ruth Richardson||Wrightson, Dairy Brands||Oyster Bay Vineyards|
|Jenny Shipley||Richina Pacific|
|Hugh Templeton||Lombard Finance|
|Fran Wilde||Brierley Investments||NGC|