maori governance & leadership

FEBRUARY 2011 | management.co.nz

Kiwi lessons from iwi governance

Lessons from the whale watchers

Iwi wealth explosion

Learning to align Maori and Pakeha governance

Maori and Mighty River Power

MĀORI BUSINESS

management.co.nz | FEBRUARY 2011

P eople, planet and profit. While the triple bottom line approach may not have been expressly mentioned at a recent symposi-

um in Wellington, this concept could best describe what Māori organisations are considering at the dawn of a post-Treaty settlement era that has the potential to significantly alter not only the Māori world but Aotearoa/New Zealand.

Governance, the Māori economy, cul-tural heritage and natural resources were the major themes at ‘Te Pourewa Arotahi – The Elevated Platform for Resolution’, a recent symposium where chief Ngai Tahu treaty negotiator and keynote presenter Sir Tipene O’Regan spoke about the post-Treaty of Waitangi settlement era, economic development potential, and the dilemma between commercial and cultural interests.

Sir Tipene called for innovative and creative thinking about the economic

Kiwi lessons

from iwi governance Iwi are exploring new governance models in a post-Treaty

settlement world, says Whare Akuhata.

challenges and opportunities for iwi in a post-Treaty settlement era.

“That thinking,” he said, “must have as its outcome norms of Māori govern-ance which can work effectively for the long-term benefit of Māori. This will not be achieved by merely relabelling existing Pākehā governance norms in te reo.”

Analysis by Te Puni Kōkiri, the Min-istry for Māori Development, shows that Māori participation in New Zealand’s GDP has lifted significantly from $2.6 billion (or 1.96 percent) in 2003 to $8.3 billion (or 5.35 percent) in 2006.

Between 2001 and 2006 the Māori commercial asset base increased 83 per-cent from $8.9 billion to $16.6 billion. Around $6 billion of that asset base was in some form of collective ownership. The treaty settlement process is estimated to represent $2 billion and future settle-ments will add a further $1.4 billion to those figures.

While acknowledging that Māori have a range of traditional values on which to draw, Sir Tipene cautioned that “there is nothing in our collective past which provides a clear precedence for the con-temporary and future challenge”.

He said the norms of good govern-ance are appropriate for Māori organi-sations but the governance model must be designed and structured to suit the fundamentally particular aims and re-quirements of iwi Māori.

“This does not mean that Māori governance should be any less rigorous or demanding of directors, trustees or management,” he said. “What it does mean is that in its design, practice and ethos it should be Māori and not merely imitative of generally articulated Pākehā values and principles.”

In Sir Tipene’s view, the most im-portant underlying principle is that op-erational governance must reflect, both


in philosophy and practice, the fact that Māori entities are essentially inter-gen-erational in character and are collectively owned. This poses a fundamental contrast with the governance requirements of the single-generation market economy with which Māori are surrounded.

He added that a further factor is a cul-tural need to recover or protect the rohe, or land, with which a particular iwi may identify. Te Runanga o Ngāti Awa, for ex-ample, has been active in purchasing land within its tribal boundary: notably a large dairy unit on the Rangitaiki Plains.

A distinctive characteristic of Māori tribal enterprises is that they are “ul-timately, not for sale”, said Sir Tipene. “And although their profits may be dis-tributed by way of share dividends or in a range of forms which may be loosely described as ‘charitable’, they are gener-ally intended to be vehicles which can, and will, maintain their capital wealth

inter-generationally.”He added there are few satisfac-

tory examples and “an overriding aim of intergenerational wealth maintenance is a tall order”.

However, he contended that it is pos-sible for an iwi-owned economic entity to acquire assets, and hold and grow them on an intergenerational basis. He also believes it is possible to reduce the prob-lems of a centralised corporate model of benefit distribution to iwi members with its attendant risk of merely privatising benefit dependency.

In Sir Tipene’s view, Māori must look for “a unique solution away from conven-tional economic management norms and understandings of the nature of benefit”. In short, iwi must construct a uniquely Māori economic paradigm centred on the intergenerational requirements of the tribe. If the tribe is to endure then its capital must endure with it.

Speaking at the same symposium, dis-tinguished professor Graham Smith, CEO of Te Whare Wānanga o Awanuiārangi, said sustainable economic development is fundamental to enabling a more self-determining existence.

Smith has just returned from Alaska where, since their settlements in the 1940s, tribes have reorganised themselves as multi-billion-dollar corporations.

“It was particularly interesting,” he said, “to observe at the Annual Alaskan Federation of Natives Convention that the natives sat under the banners of different corporations: for example the Sea Alaska Corporation, the Denali Foundation, the North Slope Corporation and so on.”

Professor Smith said sustainable economic development is fundamental to enabling a more self-determining ex-istence and Māori needed to take more care as they position themselves for the future.

Photo: Whare Akuhata

MĀORI BUSINESS


“Iwi cannot have a sustainable or ef-fective socio-economic revolution with-out a prior or simultaneous education and schooling revolution. If the treaty settlement phase has been mostly about lawyers, then the post-treaty settlement era needs to accentuate education and skills development.”

While treaty settlements are impor-tant, many people believe the key is for iwi to unlock the potential value of the Māori asset base both by themselves and with assistance from other partners and stakeholders.

Significantly, most of this activity is happening in the provinces and is expect-ed to provide a lift for these areas: many of which are experiencing considerable socio-economic problems.

Māori already have a strong pres-ence in the primary and tourism sectors: both of which are important for both Māori and wider New Zealand economic growth. The nature of the Māori asset base, cultural connections and ownership of tribal and pan-tribal entities means that Māori assets, ownership, and wealth will always remain in New Zealand.

Although much of the iwi-admin-istered asset base is now in the primary industries, iwi are increasingly looking to emerging industries and exploring the pos-

sibility of private or Crown partnerships.Early Ngai Tahu and Tainui settlements

have provided a benchmark for many subsequent agreements. Both groups now have assets estimated at around $640 million apiece.

Lessons are still being learnt: witness the latest political ructions for Tainui with a very convoluted organisational structure and a large number of players. As commentator Rawiri Taonui said in a succinctly Māori way: “Indeed at every bend of the Waikato River there is a taniwha.” This refers to the well known Tainui proverb “Ko Waikato he piko he taniwha.” At every bend of the Waikato River there is a chief.

Some tribes have elected to take their grievances to the Waitangi Tribunal where the opportunity to tell their stories at the hearings has proved cathartic for some. Currently a group of Ngā Puhi wants to proceed down this track while the main group prefers to negotiate directly with Government. Iwi will often take both ap-proaches simultaneously, as was the case with Ngāti Awa and Tuhoe.

Settlement processes require consid-erable research, which has resulted in a huge body of iwi knowledge.

The Sealord deal highlights potential problems. In this case, it took almost 12 years for the former Fisheries Com-mission to develop a method by which fisheries assets were to be shared equitably between all iwi.

Capacity remains an issue and con-siderable effort has been invested over several years to strengthen the governance and management capabilities of Māori organisations by groups such as the Fed-eration of Māori Authorities, Poutama Trust and Te Puni Kōkiri’s investment in the Strengthening Management and Governance (SMG) Programme.

A cohort of capable Māori leaders is being supported by a rapidly-increasing number of younger people who have been brought up by their elders to fill emerg-ing roles in the transition process. Many of these younger leaders have gained their qualifications – and often racked up relevant experience – overseas before

returning to their tribal homes to lead.Consul ta t ion remains a key

process with much effort being put into determining the wishes of tribal members. Te Runanga o Ngāti Awa began a process in 2008 to identify the tribe’s future aspirations. Titled Vision Ngāti Awa, the project identified four collective aspirations which set the strategic direc-

Sir Tipene O’Regan... “Operational governance must reflect the fact that Māori entities are essentially inter-generational in character.”

Completed settlements The Treaty settlement process was estimated in 2007 to represent over $2 billion of the Māori commercial asset base. Future settlements will add a further $1.4 billion to that figure. Ngai Tahu Redress amount: $170 million Year of deed: 1997 Year of legislation: 1998 Waikato/Tainui raupatu Redress amount: $170 million Year of deed: 1995 Year of legislation: 1995 Commercial Fisheries Redress amount: $170 million Year of deed: 1992 Year of legislation: 1992

Central North Island Forests Iwi Collective Redress amount: $161 million (on account against comprehensive settle-ments with members of the collective) Year of deed: 2008 Year of legislation: 2008 Ngāti AwaRedress amount: $42.39 millionYear of deed: 2003Year of legislation: 2005

Source: Office of Treaty Settlements

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tion to enable the runanga to support the tribe in realising its goals. Based on these unifying aspirations, which are long-term, intergenerational goals, the runanga re-cently released its strategic vision for the next five years.

Many Māori organisations are also frequent travellers to booming offshore emerging economies where they investigate opportunities not only in the primary sector but also in fields such as education.

Graham Smith recently returned from India where he was a guest of the Indian government. The country has embarked on a programme of developing 1000 new institutions. Over and above this, in the past two years, it has established six tribal universities.

He says his visit stemmed in part from a recent trip to New Zealand by India’s Minister for Human Resource Develop-ment who shared his concern that these tribal universities were simply replicating standard education models.

“What [the minister] got from his visit here was the fact we’re actually changing the pedagogy, changing the structure, changing the philosophies …,” said Smith, “and he wants us to work with them to show what we’re doing.”

Meanwhile, the Chinese government has shown interest in environmental research undertaken by Māori groups in New Zealand. Last year, for example, a Chinese delegation visited Whakatane and the Sawmill Workers Against Poisons (SWAP) group. These workers – many of them Māori – have been lobbying for rec-ognition that the land and waterways have been poisoned by the use of toxins used in the timber-milling process.

At the symposium, much talk on natu-ral resources centred around culture, rather than profit, as the driving force for iwi-based organisations. There was agreement that iwi should set, and meet, their own standards of protection of natural resources. In many cases, iwi organisations have their own re-source management sections and can tap into a growing pool of resource manage-ment experts.

Iwi are partnering with others who share the same values and exchanging

Sharing insightsA new Institute of Post Treaty Settlement will help capture and share the challenges and highlights of realising iwi potential and aspirations in a post-treaty settlement environ-ment.

The institute is the brainchild of distinguished professor Graham Smith, CEO of Te Whare Wānanga o Awanuiārangi, who launched the institute at a recent symposium in Wellington: Te Pourewa Arotahi: The Elevated Platform for Resolution.

Smith says his organisation will provide the academic rigour needed to sustain a ‘think tank’ of this nature.

“To anchor the institute in iwi realities, Te Runanga o Ngāti Awa is the joint venture partner. This is an opportunity to draw breath and reflect on where we have been, where we are, and more importantly, where we are heading in the post-treaty settle-ment era.”

Te Puni Kokiri, the Ministry of Māori Development, will endow a chair for three years with distinguished professor Sir Sidney Mead (Hirini Moko), representing Awanuiārangi, as its first occupant. Sir Harawira Gardiner, representing iwi partner Ngāti Awa, is co-chair.

“The idea of an institute to conduct research in the treaty settlement process has been on the minds of those who have settled their claims with the Crown for some considerable time,” Smith said. “It was clear that much of the experience, both good and bad, resided within the respective iwi and there was not an appropriate vehicle established for the purpose of bringing these experiences to light.

“The institute will be devoted to conducting research and analysis, and running regular seminars on the work of treaty settlements. The focused approach the institute intends to bring to this vital area will help not only those who have yet to settle but those who have settled.”

knowledge of best practice. Does all this amount to a triple bottom

line approach? Perhaps, but it will be adapted by Māori to suit their own particular requirements for a period that offers both huge potential and risk for not only the

Māori world but for greater Aotearoa/New Zealand. M

Whare Akuhata (Ngāti Awa and Ngāti Whare) is a

photojournalist who for the past 18 years has covered

a wide range of Māori issues. [email protected]

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MĀORI BUSINESS


W hen the Human Rights Commission (HRC) sought to discover what makes some businesses

successful and employees happy to work there, more than 3000 employers and em-ployees across 16 regions of the country had their say.

The feedback for the National Con-versation about Work, the HRC’s largest ever work-based project, highlighted the benefits that business can derive from taking a tikanga Māori approach.

Such a business model incorporates tikanga principles, which can be loosely translated to mean ‘the right way of doing things’ or ‘the Māori way’ of doing things. Tikanga, a set of protocols and procedures, stems from the word ‘tika’, meaning cor-rect and right.

In his book Tikanga Māori: Living by Māori Values, Hirini Moko Mead says it involves “moral judgements about ap-propriate ways of behaving and acting in everyday life”.

Relating this to the business world

Lessons from the

whale watchers

A bunch of businesses are benefitting from having tikanga Māori principles at their core says Katherine Ryan.

encompasses an importance on building relationships, connecting individuals to the wider group, the connection of people to the history of the rohe (region), valuing the wisdom and knowledge of older gen-erations, looking after the environment and wildlife, working now for the benefit of future generations, and maintaining traditions. It also acknowledges the time it takes to do these things.

As everyday life changes, so too does tikanga. Mavis Mullins, of Dannevirke-based fourth-generation shearing business Paewai Mullins Shearing, says tikanga is not “stuck in concrete”, but rather “evolves with the people, with each generation”. Mullins, whose company featured in the National Conversation about Work project, says tikanga has to maintain “a fair amount of relevance”.

A tikanga business model is holistic and includes variables such as the com-munity and sustainability.

This is the case at Whale Watch Kai-koura, which has a commitment to the environment and focuses on the benefits

to the community. Founded in 1987 by a group of local Kaikoura families, the company is still run by locals and its ma-jority shareholding remains locally held. “The community and Whale Watch are one and the same,” says chief operating officer Kauahi Ngapora. “What benefits us, benefits the community. What benefits the community, benefits us.

“… It merges back to that connection Māori have with the environment and sustainability. We have them both to lose if we don’t look after what we have here. If there are no whales, no dolphins, there’s no Whale Watch.”

Community and the environment are stipulated in Whale Watch’s business plan, with a strategic goal to financially empower the company to achieve their wawata – aspirations, hopes, dreams and desires. It’s about “doing the things we want to do rather than the things we have to do”, as Ngapora puts it. The company’s core values – the five Cs of company, customer, community, conservation and culture – underpin how the business oper-


ates and are based on the modernisation of traditional philosophies.

Ngapora sees valuing and respecting customers as manaakitanga – hospital-ity, or the “Māori version of customer service”. How to treat people – making them feel welcome and taking care of their needs – is another aspect of tikanga. A modernised version of this for Whale Watch is recognising that customers are now more aware of the environment. They expect companies operating out of nature to be doing things the ‘right way’, with a view to sustainability and environmental consciousness, says Ngapora.

One of the benefits for Whale Watch of integrating Māori cultural values with business practice is the point of difference it gives them, particularly as the majority of their customers are overseas visitors to New Zealand.

These visitors can form a lasting im-pression of the country as a whole from their experiences with Whale Watch from every aspect ranging from the logo to personal contact.

The company logo tells the story of

Paikea and Tohora and the journey on the back of a whale from his old land to a new life and prosperity. The names of the vessels are culturally significant, each with the tā moko (design element), and guests are welcomed on board with a short mihi. Ngapora says the experience is a blend of their Māori cultural identity (and things they would do anyway) and being con-scious of the general ‘Kiwi’ culture.

Crucial to the concept of tikanga are whanaungatanga (relationships, family connection) and manaakitanga. The Na-tional Conversation found Māori-owned businesses saw these concepts as crucial to their work environment.

Mavis Mullins believes focusing on people ultimately leads to enhanced pro-ductivity – the bottom line is taken care of as an adjunct. “Pride in your work, turning up for work, being valued in work are not tangible assets to a company, but they pay off in productivity,” she says. “The com-pany has maintained market share, during a time when shearing numbers have been declining for up to 10 years.”

Tikanga at work means being inter-

ested in employees as individuals, not as a commodity. Outside interests and respon-sibilities are valued, as they contribute to the person and then to the company. “It’s that whole investment in human capital, which isn’t always that easy to capture or measure,” says Mullins.

She adds that the benefits to the shear-ing business can not always be explained with numbers. “Someone could say to us, ‘show us how, show us where’. But when you look at the bigger sector, the bigger industry... it tells us we are doing some-thing very, very right.”

If the shearing company takes on 10 young people, invests in their training and only two stay on to become qualification holders that is a success. “If we can help two of those people to capture personal confidence and some transferable skills, then everybody has benefitted from it. It’s not about 10 out of 10; it’s about anything out of anything,” she laughs.

Mullins says the main aspect of tikan-ga in their business is that new employees are taken in to the family and become whānau. “You turn up at our home and

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MĀORI BUSINESS


we’re sitting down to a meal, then you’re invited to sit down and have a meal with us, whether it’s a roast dinner or a tin of baked beans.”

Translating tikanga into tangible busi-ness success at Whale Watch has been a little more apparent through the interna-tional recognition it has gained over the past two years.

In November 2009, the company won the Virgin Holiday Responsible Tourism award, in London, and in May 2010 the Tourism for Tomorrow award for com-munity benefit, in Beijing. Being put on the international stage gives great exposure to the business and Kaikoura and creates pride in the staff and locals. “We’re a small-to medium-sized company in a lit-tle town and we take it out to the world,” says Ngapora.

The connection of whānau, whakapapa and rohe is translated in Wakatū Incor-porated’s Associated Director’s Scheme. The Nelson-based Māori-owned business collective aims to grow the next generation of governance through whakapapa and en-courage young blood into the boardroom.

Shareholders and whānau are given the opportunity to gain experience in the governance of Wakatū Incorporation, with a view to becoming nominees for future board elections.

Associate director Kerensa Johnston says all decisions made are consistent with whānau values, history and culture. “It’s always about looking backwards, to where we began and where we come from, with a view to looking forwards and being consistent with those values and ideals that our ancestors had,” she says.

Like Whale Watch, kaitiakitanga (guardianship) is a strong aspect of tikanga for Wakatū Inc – “making sure we are effective and responsible kaitiaki – guardians – of our resources”.

Wakatū Inc head office is currently engaged in the carboNZero programme and has achieved level one of the accredita-tion process. “So we are making sure we’re doing things to put those principles into practice,” says Johnston.

The complexity of Wakatū’s seven businesses means it is important for future

directors to be equipped with the necessary commercial skills and understanding of the history and peoples of Te Tau Ihu. By supporting upcoming board members, Wakatū is planning for the future.

Johnston says the opportunity for associate directors to work with board members, some of whom have been there for 20 to 30 years, is invaluable.

“It’s a very gentle succession process,” she says. “Other commercial entities can be quite cut and thrust and competitive, in not just governance but management as well. At Wakatū, there’s a real willingness from the current leadership to create op-portunities for the younger generation. ”

The connection between generations and sharing experience is also evident in Whakatū Marae’s Wonderful Wāhine programme. The youth-to-work pro-gramme aims to keep young Māori girls at school longer and encourage them to connect with tertiary education, training or employment.

The programme is run in conjunction with Nelson’s Nayland College and has an annual intake of around 30. The partici-pants learn from the experiences of their kuia as well as listening to other young role models, building new relationships and checking out career opportunities.

The basis of tikanga here is to strength-en and build capacity in the younger generation. As a result of the programme, participants find they have better social in-teraction with peers, whānau and the com-munity. The participants stay in school longer and have better relationships with teachers, counsellors and the school.

While tikanga is a Māori concept, putting values and standards into a busi-ness is not culturally specific. “Values are not owned by any one people or one group of people,” says Mullins. “They’re owned by us all.”

Ngapora echoes this idea. “It’s not just Māori culture. It’s the company culture and the Kiwi culture. It’s trying to merge all those things into a more modern type of framework.” M

Katherine Ryan is a communications specialist for the

Human Rights Commission. [email protected]

Tune up your tikangaThe Māori businesses highlighted in the Na-tional Conversation about Work project are willing to share their good practices with other organisations interested in exploring the tikanga model.

For more information and contact details go to http://www.neon.org.nz/nationalcon-versationaboutwork/

Wonderful Wāhine at work

september 2010 | THE DIRECTOR

SEpTEmbER 2010VOl 8 NO 4

Iwi trusts and community trusts manage and deliver

substantial resources for the benefit of their communities.

But a recent research report reveals they take very

different governance approaches to managing their

investment assets. Reg Birchfield analyses the findings.

Iwi wealth explosion

pHOTO: Tuku morgan, chairman of Waikato-Tainui Te Arataura, receiving a dividend cheque from Tainui Group Holdings chairman John Spencer.

THE DIRECTOR | september 2010

Iwi trusts are becoming big business. They are growing their investment assets at a 50 percent faster rate than community trusts according to a study by Nicolas Maier, for

his University of Auckland MBA. And it’s all down to asset allocation – not market timing, “better share picking” or luck, he concludes.

The study of a total of 20 trusts – seven iwi and 13 community – highlights sig-nificant differences in the types and ratios of assets held by iwi trusts compared to community trusts. Asset allocation – the percentage of a trust’s portfolio invested in each asset type – encompass a broad range of investment categories such as cash, bonds, real estate, public shares, private companies and hedge funds.

Numerous studies have proved that, over time, asset allocation is the single most

important determinant of long-term returns. According to Maier’s research, the iwi

trusts are investing far higher percentages of their assets in equities and other growth investments. By comparison, community trusts hold proportionately more in cash and bonds to earn income to distribute today. “The reason for this difference is that iwis intrinsically tend to adopt very long-term intergenerational outlooks to support the future of their families and descendants,” Maier says.

The benefits of equity-like investing are, says Maier, illustrated by some very long-term investment data – 196 years of it in fact – according to Yale University’s chief investment officer David Swensen. He showed that if a perpetual investment fund, not unlike New Zealand’s community and iwi trusts, held US bonds for 196 years

it would have turned $1 invested into $9950 over those years. But holding a mix of the US large-capitalisation stocks (similar to the Dow Jones Index) would have turned the dollar into $9.8 million.

In the short term there are, unquestion-ably, greater risks in holding equity-like investments because they can be volatile, hard to value and difficult to sell in a hurry. Often, such investments require consider-able due diligence, and ongoing time, energy and management. As a result, Maier’s study noted that appropriate skills, experience and governance frameworks are essential for trusts investing in equity-like assets.

According to Maier, the community trusts he surveyed are investing nearly 50 percent in bonds and cash – regarded as lower growth, but less risky investments. Their equity investments are predominantly via sharemarkets. On average there are some small holdings, 15 to 18 percent, in private equity but these are usually specific assets such as local power generation companies or airports that have been gifted to the trust. “There are very few direct investments by the community trusts where they actually buy and manage a portfolio of private compa-nies as part of an equity strategy,” he says.

Consequently, community trusts are likely to get only the average market return over time. Iwi trusts are looking to actively manage their investments and work toward higher (eventual) returns. The iwis Maier surveyed have around 60 percent of their net assets in private companies and around 35 percent in real assets such as farms, forests and livestock.

“The iwi trusts are backing their own management ability or investing in compa-nies which they feel have good management which they can leverage,” says Maier. “This is a significantly different approach from the community trusts. Iwi are saying ‘let’s get involved and try to improve the outcome’. Community trusts are saying ‘I’ll take what I can get’.” Source: Nick Maier. Based on a sample of 13 community trusts and seven iwi trusts.

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september 2010 | THE DIRECTOR

Based on their different investment strategies, Maier estimates that the seven iwi trusts will accelerate their value growth, surpassing the 13 community trusts before 2035 and creating an increasing size gap thereafter. In 50 years, by 2060, he forecasts the iwi trusts will have grown from $1.4 billion to $21 billion in assets (15 times larger) compared to the community trusts growth from $2.9 billion to $8 billion (2.7 times larger).

If the community trusts grew at the same pace as their iwi counterparts, they would reach $43 billion instead of $8 billion. The implications of this differential growth scenario are enormous given that trusts gen-erally distribute a proportion of their annual income or value to their beneficiaries.

As a result of the different core asset allocations, Maier’s study forecasts that greater fund values will also lead to higher distributions to beneficiaries over the next 50 years. In 2009, total grants from the 20 trusts Maier surveyed were approximately $175 million. The community trusts distributed and paid out almost twice the amount of the iwi trusts – about $115 million compared to $60 million.

However, as with total asset values, the relative distribution levels will completely reverse in 50 years, Maier reckons. In the year 2060, the iwi trusts are expected to make grants of approximately $865 million compared to $320 million by the community trusts, according to Maier. The cumulative

distribution results are equally impressive. During the next 50 years, the iwi trusts are forecast to distribute $15.4 billion compared to the $10.4 billion by community trusts.

Governance IssuesNick Maier’s father Sandy Maier, a high-profile professional director who serves on the boards of a number of perpetual trusts, believes that “one of the issues for trusts pursuing more equity-like asset allocations is making sure they have their governance set up correctly to ensure sound, long-term strategies are followed”.

According to Maier senior, iwi trusts are actively building their governance capability.

They are, he says, committed to provid-ing formal training for their directors, adopt-ing international best practice models for their existing organisations and, “changing their structures accordingly”.

“They are also using more formal written

board charters and strategic plans, learning from and correcting their mistakes and, sourcing independent directors through independent search committees and search firms,” says Sandy Maier.

“Some of this means simply moving away

from boards that have elected or appointed representatives to boards with a better or richer mix of external, professional and skills-based members.”

Community trusts, according to Nick

Maier, tend to hire financial advisers and use a benchmarking process to guide their investment selection. Iwi trusts, on the other hand, have often been ‘gifted’, or settled historic claims for, a large portion of their assets. In several cases they have,

Contact Carrie Hobson or Stephen LeavyAuckland OfficeT +64 (9) 379 2224 PO Box 362, Auckland 1140 Level 3, Shortland Chambers, 70 Shortland Street, Auckland 1140

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Iwi trusts are actively building their governance capability.

Nick maier.

he says, hired in sector-specific experts to help them manage their assets – such as company directors, property managers and forestry managers.

Maier’s conclusion, therefore, is that the iwi trusts are pursuing the opportunity

to manage the performance of their assets themselves using the best in-house manage-ment that they can obtain.

“The interviews and discussions I had during the study confirmed this was a cor-nerstone of several iwi trusts’ investment

management approaches,” he says.Maier’s study found that perpetual trusts

need rules for decision-making and to be disciplined about sticking to those rules in times of uncertainty or turmoil. “Some of the best organised trusts have worked very hard to get the best minds around their table and borrow ideas from best practice and interna-tional examples,” says Maier. “These trusts are building on decades of other people’s experience and recruiting external experts to assist in these endeavours.”

Maier also believes iwi trusts have ap-proached their advisers and investments conservatively. “Having spent many decades fighting to get ownership of their assets back, there is an understandable desire not to lose them again. The process of building up management expertise has been gradual and somewhat emergent. The trend now, particularly in the larger iwi, is towards formalising their governance systems and structures and building up their internal management abilities.

“As one iwi member I spoke to said: ‘We try to get the best minds around the table and then test models and outcomes. We get independent directors onto our board and [get] the strongest and most competent group of managers and board members that we can. We draw on these people to put policies, strategic frameworks, and asset allocations in place’,” reports Maier.

His report concludes that: “We will see iwis become significant forces in the New Zealand economy and generate very strong benefits for their communities.”

Maier says both groups of trusts have a perpetual mandate. “They intend to last for-ever and preserve equity between generations. They are supposed to give the same benefit to their community today as tomorrow, and 20 years from now. And yet they arrive at very different investment approaches. Their ap-proach is miles apart. Will they both succeed? Or will one group significantly outperform? Time will tell.”

A tAil of successThe trust-run company Whale Watch is a multiple award-winning nature tourism

company owned and operated by the indigenous Kati Kuri people of Kaikoura, a

Maori sub-tribe of the south Island’s larger ngai Tahu tribe.

Whale Watch was formed in 1987, when Kaikoura’s declining economy had hit

the local Maori population hard. Leaders like Bill solomon believed the local sperm

whales held the answer to the unemployment problems of the Maori community, so

the Kati Kuri founders of Whale Watch mortgaged their houses to secure a loan to

start the business.

The venture has grown from a single small inflatable vessel to today’s fleet of four

modern catamarans specially designed for whale watching.

The expansion of the Whale Watch fleet sparked the building of an entire marina

in south Bay, from where the whale watching tours now depart.

The company has also seen investment in new accommodation, restaurants,

cafes and galleries, which have transformed the tiny seaside settlement.

BnZ Bank’s series of Tv advertisements about its investment in the venture have

turned Whale Watch into a household name.

THE DIRECTOR | september 2010

JULY 2011 | THE DIRECTOR

Learning to align Maori and Pakeha governance

The total asset base of the Maori economy is reportedly now around $35 billion. The Director last year (September) reported

that iwi trust investments are growing 50 percent faster than community trusts in general in New Zealand. Maoridom’s assets, investments and other enterprise activities are burgeoning.

Iwi governance is, as a consequence, under pressure to build its competencies. Competent governance in the Pakeha world is rare enough, but, says Auckland-based Maori business services manager at BDO Wiwini Hakaria, Maori must deal with additional overlays of complexity.

Balancing the needs of the entity, trustees and beneficiaries with economic, cultural, spiritual and social considerations is one example. A general lack of financial literacy – not peculiar to Maori but at this point more prevalent in its ranks – often leads to result-versus-expectation misunderstandings. Being able to ask for assistance while still maintaining mana, pride, standing and power sometimes raises issues, as does keeping “personalities” out of the conversation when judging the merits of various opportunities.

“Actually, governance has existed in Maoridom for many years,” says Hakaria. “It is just a different format. In pre-colonial days, Maori had resources and individuals who had to govern what happened with those resources to the benefit of their whanau, hapu and iwi.”

Hakaria believes the terminology can be re-framed to explain the process whereby traditional forms of Maori governance

Iwi trusts and assets are among the fastest growing and most dynamic sectors of the New Zealand economy. Wiwini Hakaria is helping Maori directors and trustees master the rules of the governance game.

are retained and effectively aligned with governance in the Pakeha sense.

Profit is not the singular objective of most Maori businesses, says Hakaria. “Consequently we need to balance up the spiritual and other needs such as providing jobs, education and social support. There are four considerations – spiritual, economic, environment and social. The governing body must represent all of these interests. Maori boards must be sufficiently diverse and skilled to meet all these needs.”

To provide an acceptable measure of effectiveness in the pragmatic commercial world in which Maori trusts and businesses must operate, the largest trusts are re-thinking board composition, says Hakaria. “They might, for example, have six trustees of which three are Maori. The three non Maori will have a different perspective and bring a more robust debate to the table.”

Measuring effective performance is, in his opinion, invariably different because

Maori trustees tend to take a long view. They secure against the future rather than perform to deliver a short-term cash dividend. “Don’t get me wrong, they still have to perform to provide funds or different benefits back to their people,” he adds. “But Maori strongly believe that they are temporary custodians (of their assets) and must look after them for future generations.”

Hakaria concedes that the shortage of financially literate Maori poses some difficulties. For example, only two percent of New Zealand’s 30,000 strong accounting fraternity are Maori. It will take time to change that. He takes heart, however, from a trend toward appointing Maori trustees to the boards of some of New Zealand’s largest state owned enterprises and private sector companies.

The business and investment landscape is changing rapidly for Maori. As a consequence, they are consulted and more frequently involved in organisational governance. Consulting firms like BDO are, for example, providing specialist advice to Maori. “My job is to help Maori entities. But I also help educate others within the firm about Maori protocol and tikanga, customs and traditions,” he says.

Hakaria believes there has been a “huge shift” in understanding in the last two to three years. “Companies are beginning to realise just how large the Maori economy is and how rapidly it is growing.”

Given the size and dramatic growth of our Maori economy it is hardly surprising that a new appreciation of the need to build governance competencies is, from both Maori and Pakeha perspectives, finally emerging.

Wiwini Hakaria… “Maori boards must balance up spiritual, economic, environment and social needs.”

Responsible goveRnance

management.co.nz | octobeR 2011

Withers. “Forging relationships in which directors have respect for each other without resorting to group think is critical,” she says. “We have a diversity of views around the Mighty River board table. The senior management team runs an outstanding induction process for new directors. It brings them up to speed quickly. And now we are running a series of refresher tutorials so that direc-tor understanding of the complexities of our business is up to scratch.”

Mighty River’s induction programme emerged from a comprehensive board process review. “Some of the less com-mercial directors were struggling to keep up,” says chief executive Doug Heffernan. “Management was therefore challenged to help the board. The induction pro-gramme emerged as the flow on benefit.”

Electricity generation is a complex business. Keeping directors up to speed and providing board papers that distil and interpret the issues and help direc-tors make sound decisions is both a management and governance priority. “We get very good board papers,” With-ers says. “They are long enough for us to

understand the issues and ask the right questions, but short enough for direc-tors to comprehend without 20 hours of reading. That is hugely important. Directors come to the meetings knowing what the issues of the day are.”

ManageMent deMeanouRBoard composition, professional proc-esses and “the demeanour of manage-ment” are fundamental to responsible governance practices, according to Withers. “The board must be treated with deference and respect so that when the questions are asked, manage-ment responds and comprehends the relevance of the questions. I have never felt, on this board, that we are treated like mushrooms. That’s how manage-ment treats some boards. They expect directors to simply rubber stamp what they want to do.

“Our executive team is always ready to debate and discuss issues and to put forward and defend their views. Most importantly, they suck the wisdom out of the directors to gain critical insights or leads on new approaches.”

Maori and Mighty River Power

Mighty River Power has made an impressive effort to understand and promote the value of strong partnerships with Maori business enterprises.

What it has learned in the process is central to its commercially and culturally enlightened governance

practices. This is the sixth and final article in Reg Birchfield’s series on responsible governance.

Responsible governance, says Mighty River Power chair Joan Withers, starts with having the right people around the board

table. Then it takes an open and trusting working relationship between the board and senior management team to deliver.

And board composition, she says, is about having the right skill mix. That’s not always easy in a state owned enter-prise. Politicians, or more accurately cabinet ministers, pull the candidate se-lection strings. Getting good directors in place can, therefore, be challenging – not that Withers would express it that way. All political regimes stack SOE boards with favoured hacks when they can.

Mighty River has, in that regard, fared better than most. It has been forced to accommodate the occasional aged wasp, but generally its board ranks well on gender and other diversity, experi-ence and competency. The result is an energy enterprise that has performed consistently well and was named Energy Company of the Year at the 2010 Deloitte Energy Excellence Awards.

Board behaviour is important to

octobeR 2011 | management.co.nz

Heffernan agrees that his manage-ment team benefits from the board’s diversity of views and experiences. “The electricity industry’s dna is pretty close,” he adds. “It is a tight sector. The roots of those employed in it are all grafted from the same gene stock. Having access to the diversity that sits around the board table is important.”

The electricity industry administers large assets and earns its living from man-aging natural resources, says Heffernan.

“At a cultural level, the characteristics of these two realities require that we act responsibly both within the community and for the regulators. Otherwise, we won’t be given the privilege of accessing those resources. Because we need a licence to op-erate, professional environmental manage-ment, sustainability and ethical practices are imperatives. Governing responsibly is fundamental to our success,” he adds.

“On the big assets side, being respon-sible for personal safety is paramount. If

we weren’t on top of that we’d be exposed to reputational damage in a big way. To take the company forward strategically, we must protect our right to use the natural resources and have the trust and respect of our people.”

MaoRi paRtneRshipBoth Heffernan and Withers credit Mighty River’s understanding of the need to embed ethical governance in the company’s corporate dna for its deci-sion to partner with Maori land trust interests to use geothermal resources to power its energy generation strategy.

“Nobody owns our geothermal re-sources,” says Heffernan. “To get access you must reach an agreement with land owners. Typically, Maori land trusts own the land that sits atop our geother-mal reservoirs.”

When Mighty River saw New Zea-land’s Maui oil field declining while the need for more energy grew, it saw the geothermal potential. Coincidentally, Maori interests were looking for greater involvement in the development and ownership of their resources. Maori

Mighty River Power chair Joan Withers and chief executive Doug Heffernan: governing responsibly is fundamental to Mighty River's success.

To take the companyforward strategically, we must

protect our right to use the natural resources and have the trust and

respect of our people. – Doug Heffernan

Responsible goveRnance

management.co.nz | octobeR 2011

were effectively disenfranchised by traditional royalty-based resource ex-ploration models. But they had no cash to develop their resources.

Mighty River decided to find ways to allow Maori landlords to participate in their geothermal strategy and simul-taneously build equity in the energy business. “They became true investors in the project,” says Heffernan. “Elec-tricity generation is a long-term busi-ness. Projects take 30 to 50 plus years to complete. There is, therefore, risk from any misalignment of investor interest.

“Maori investors take a very long view. Having them involved as joint equity participants means we are joined at the hip.”

Mighty River’s new $430 million Nga Awa Purua project on the Rotokawa geothermal field, 14 kilometres northeast of Taupo, is now 25 percent owned by the Tauhara North No 2 Maori Land Trust. “It is earning royalties that are being distributed to its 2000 plus own-ers,” says Heffernan. “As a consequence, the economic wealth of their people is fundamentally changed from what it was a decade ago.

“They would not have partnered with us unless we could demonstrate that we could look after and manage that re-source sustainably. They want it for their grandchildren and their grandchildren’s children. Sustainability was fundamental to the business proposition.

“We used creative financial and other professional expertise to find a way to structure a venture that delivers a fair return to the company and provides the Trust with equity and income. The proc-ess by which we aligned our interests and

found a solution was highly regarded by Maori. Until a year or two ago we were the only company doing things in this way. It was very innovative,” says Heffernan.

The exercise has given Mighty River traction with Maori investment inter-ests. “We saw what we did as being a significant and responsible approach to harnessing a valuable energy resource,” he adds.

The Nga Awa Purua project and other negotiations around the use of Waikato River water resources have lifted both the board and management’s understanding

of how established large enterprises and Maori interests can work together. “We must work together more for the greater economic good of both parties and the country in general,” says Withers. “New Zealand needs to get the picture of the potential of Maoridom as an economic powerhouse for this country.”

The company is also partnering with Maori on other projects. In a kind of role reversal, Mighty River executives like Heffernan are providing technical ad-vice and governance guidance to Maori boards keen to lift their governance skills and understanding of conventional busi-ness models.

Mighty River, like other SOEs, complies with the Securities Com-mission based Corporate Governance Principles of responsible governance standards and practices. It also has its own continuous disclosure regime. The board acts much like a listed com-pany board. “We are accountable to one shareholder, but all the processes around our governance recognise our place as one of New Zealand’s top 25 companies,” says Withers.

living ethicsThe company’s published code of ethics dates back half a dozen years. Its existence was triggered by plans to work with a Sri Lankan enterprise. “The code is now a living document,” says Withers. “We deal with things on an issue-by-issue basis but we live by the specifics and the sentiments contained in the code.”

The relationship between board and management is, says Heffernan, trans-parent and built firmly on confidence and mutual trust. “Board members have access to the senior management team. The process makes my life easier,” he adds. “Management understands directly the issues board members are dealing with rather than hearing it from me second-hand.”

The company has whistle-blower provisions within its employee codes of practice and training programmes. “We need these provisions because we deal with natural resources and at the con-sumer end, electricity is a common ‘good’ that people expect,” says Heffernan. “The expectation of professional performance is high in our industry. Everyone needs to know where they stand and what needs to be done.”

“We have robust internal audits of all processes important to strong govern-ance,” Withers adds. “Our risk assurance board committee is very effective.”

Mighty River was one of the first SOEs to introduce annual public meetings. “We have always taken communication with all our stakeholders seriously,” says Hef-fernan. “We engage out in the community very interactively and, as a company, we enjoy the process.”

What of the future? Mighty River is picked as the first SOE most likely to have 49 percent of its government shareholding sold to the public if National is returned to power in next month’s general election.

“It’s a great company with a strong eth-ical and performance tradition. If the sale option comes to pass, it will offer a great investment opportunity,” says Withers. “Mighty River’s culture is firmly embedded in the enterprise. Transition, if there is one, should be relatively seamless.” M

New Zealand needs to get the picture of the potential of Maoridom as an

economic powerhouse for this country. – Joan Withers

maori governance & leadership

Documents