Government regulations should be ‘targeted’ towards problem areas rather than enforced as a general policy, BusinessNZ Chief Executive Phil O’Reilly said.
“New Zealand has a long history of successful businesses and hence enforcement of policies and regulations that affect all enterprises in all sectors of business would be unnecessary and unfair,” he said.
Mr O’Reilly was the Guest Speaker at the second (2012) edition of the Indian Newslink Sir Anand Satyanand Lecture held on Monday, July 30, 2012 at Stamford Plaza Hotel in Auckland.
Speaking on ‘Good Governance: Who wins- The Shareholder, the Public or Gordon Gekko?’ he admitted that some companies in New Zealand (as elsewhere in the world) were ‘criminally at fault.’
“Such companies undoubtedly need to be regulated, with their directors made liable for criminal charges. Those who compromised the safety and security of investors and other stakeholders deserve to be punished and even imprisoned.”
Mr O’Reilly said that there was also a need to distinguish between a poorly performing company and a fraudulent company.
“I am happy that the ‘Financial Markets Conduct Bill’ (now with Parliament and its Select Committee) will help to identify reckless directors and discipline those involved with the management of companies. It is imperative to build investor confidence and provide them with opportunities for wealth creation. The whole economy will stand to benefit,” he said.
Stating that every business and activity carried with it elements of uncertainty and changing market conditions, he said that even those that are scrupulously well run can face losses. Public companies should have a ‘laser focus’ on quality and every director and employee should be responsible for ‘quality control.’ We must have people of competence with the confidence to succeed,” he said.
Risk Management should be treated with utmost importance since good risk management leads to good rewards that benefit all stakeholders, including the people of the country, he said.
“Successful companies are a means to an end because the end is a country and an economy that are progressive. These are companies that raise financial and human capital and create values. Every organisation should know its value,” he said, describing the concept as ‘Price Discovery.’
“Accountability, transparency and integrity are all factors that lead to Good Governance, which should be constantly addressed by businesses, social groups, community leaders, and even parents. Good Governance acquires greater significance in New Zealand where the concept of ‘Small Enterprise’ is different compared to other OECD countries,” he said.
The Governance Gap
Mr O’Reilly said that many small companies fail to grow or face financial difficulties because of bad governance. There is a governance gap in these companies, he said and suggested them to seek proper advice.
Labour Member of Parliament Dr Rajen Prasad said that the collapse of companies – both national and international – have had adverse impact on investors, especially those with modest income.
“The effects of these failures on mum and dad investors were devastating. They were entitled to rely on the components of corporate governance such as our legal framework, discipline of capital markets, behaviour of nominees on company boards, statutory audit processes and codes of conduct; and yet they were not protected,” he said.
He said regulatory reform would impact on the governance arrangements in an entity but success can be guaranteed only when those responsible adopt an ethical approach to business.
“The values of honesty, integrity, transparency and good judgement have been non-negotiable foundation for Sir Anand and Lady Susan Satyanand in their lives. The Indian Newslink Sir Anand Satyanand Lecture is a tribute to them,” Dr Prasad said.
Ignition Partner Executive Director Chad Wilkie said that there was a shortfall in the practice of governance in New Zealand’s wider business environment.
“Many businesses still do not separate management from governance; they do not understand the importance of independent input into strategy and risk management in a business context and do not hold management to account for implementation of an agreed plan,” he said.
Earlier, Global Organisation of People of Indian Origin New Zealand President Alkesh Sharma presented copies of the book, ‘The Indian Diaspora’ to Sir Anand and India’s High Commissioner Avanindra Kumar Pandey.
Barrister Brian Stephenson was the Master of Ceremonies at the Lecture, which was attended by Sir Anand, Lady Susan Satyanand, Mr Pandey, Members of Parliament Kanwaljit Singh Bakshi, Dr Jackie Blue (National), Dr Rajen Prasad (Labour), Winston Peters (New Zealand First), Russel Norman and Julie Ann Genter (Green), Manukau District Court Judge Ajit Singh, members of the legal profession and business leaders.