NZX rule changes

By Graeme Kennedy

Thursday 8th April 2004

New NZX listing rules requiring corporate boards to have a minimum number of independent directors would help ensure decisions were made in investors' best interests, former Mercer New Zealand chief executive Louis Boulanger says.

Mr Boulanger, who left the New York-based financial and HR consulting firm last week after 18 years with the company, said the requirement was among a number of revised rules which after consultation with industry and the Securities Commission were now with the Ministry of Commerce.

They were expected to be implemented in May 3, he said.

"Only 29% of companies worldwide have an independent director on their boards, 35% have none and there are obviously not enough in New Zealand," he said.

"With independent directors, board decisions not necessarily in shareholders' best interests will be less likely to be made and therefore less value would be eroded.

"It should be natural for corporates to act in their investors' best interests but boards have very little investor representation.

"Some fund managers do act in their interests as guardians of their savings and they will try to gain maximum leverage at AGMs to express discontent investors might have but that is just the tip of the iceberg.

"Investors should have a voice at all times, not just as AGMs but through independent directors who are investment professionals.

"New Zealand's history of eroded value by bad management and board decisions has been pretty horrendous and a lot of it might not have happened if more independents with professional experience had been on boards."

Mr Boulanger said independent directors were part of a mix of initiatives New Zealand had taken to ensure best international practice on how corpor-
ates were governed and ensure investors knew they would "get a fair go."

"They would know the market is regulated to best practice, not the Wild West," he said.

Mr Boulanger joined Mercer the consulting division of global financial services company March McClennan after working in insurance and the financial risk business as a consulting actuary in Montreal.

He was made a director of the New Zealand company in the mid-1990s and was chief executive from 1997 until 2000 when the CEO role was made an Australasian position based in Sydney.

"I was happy to return to a more-focused consulting role but the company wanted to restructure further and fully integrate both the New Zealand and Australian operations and I disagreed," he said.

"New Zealand has a different environment with significant differences in tax, savings and regulatory areas and what works there won't necessarily work for us."

Mr Boulanger, who founded the NZ Society of Investment Professionals in 2000, plans to develop a portfolio of independent directorships on boards of listed companies and trustees.

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