Don Brash writes a defensive article for the NZ Herald on the Huljich mess. He claims that to compare Huljich to the finance company debacle is wrong. He further states:-
KiwiSavers did not lose money as a result of Huljich’s actions
He notes Peter Huljich effectively compensated scheme members for losses on investments. Yet through the non-disclosure it can be argued that returns were mis-stated. It is legitimate to ask why this was done without full disclosure initially.
Brash takes a few sideswipes at comments made by Gareth Morgan and Carmel Fisher specifically, with some pointed comments about Morgan especially. Yet it seems to me, that he may be missing the point.
If I was an investor in the Huljich fund I would have been looking to the board to have exercised appropriate supervision as part of their governance, such that they had adequate information regarding what was happening.
Questions arise as to just what oversight was being exercised? Was there adequuate governance?
Sir Adrian Cadbury back in the early 1990s in the Cadbury Report led the team that defined corporate governance:-
Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.
Over time this has come to be seen as including, as I have written elsewhere:-
ensuring that both board and management have appropriate information systems which deliver the reports and other information required to make decisions and monitor events, with an assurance as to the integrity of the information provided.
The definition formulated by Cadbury has stood the test of time. It provides clear delineation of the respective roles of owners, directors and managers. Further, it makes reference as well to the over-riding governance of the law and regulations. Increasingly, it has been argued that this includes to the community at large.
In general are boards of directors putting in place appropriate governance? Are they ensuring that they have the information, advice and knowledge which they require in order to exercise their governance function?
Are NZ boards as alive to governance issues as much as they should be? Are they managing their risk exposures in this area properly?
Interestingly the Herald runs an article by Brian Gaynor today looking at the mixed track record of politicians making the tranistion to business.
What I find interesting is why given the critical nature of governance in the corporate world today and the fact that as former politicians these people should be well aware of the need to be well informed with a complete information flow that the record should be so patchy.