Branch office status keeps chief executives on move

By Peter V O'Brien

Friday 1st November 2002

It is time to replace or amend the signs at international airports that welcome visitors to New Zealand-Auckland- Wellington-Christchurch. Visitors should also be welcomed to "the world's branch office."

The most financially powerful businesses in New Zealand, possibly excluding Fonterra and Telecom, are overseas-owned and their eventual controllers treat them as branches. That was seen in recent coincidental announcements of new chief executives for three of the biggest.

Carter Holt Harvey chief executive Chris Liddell goes to the US head office of International Paper, CHH's majority shareholder. He seemed to be part of the local "corporate furniture," including membership of the Rugby Union's board, a more prestigious position in many New Zealanders' eyes than chief executive of CHH.

The overseas-owned banks got into the branch treatment act, starting with Westpac's recent management changes. It appointed Bank of Melbourne chief executive Ann Sherry as group executive "New Zealand and Pacific banking and CEO of WestpacTrust," the latter almost simultaneously dropping the "Trust" part of its name.

The new name for the New Zealand operation ended Westpac's link with the former Trustbank, whose constituent regional trustee banks had historic origination in the 19th century.

The Westpac chief executive-designate for New Zealand made the appropriate comments about her appointment, which others might see as a "state manager" (a standard Australian corporate term and a movement up the bank's berry tree). We see this regularly in the diplomatic area where the US has appointed ambassadors to New Zealand who are basically amateurs and get backup from State Department professionals.

The incumbent could have learned something about international relations from his undoubted success as an investment fund operator but he and many of his predecessors are effectively "branch managers" in the US political hierarchy.

ANZ Banking Group said New Zealand chief executive and former Treasury secretary Murray Horn would move to Sydney as managing director of global institutional banking. His replacement would be the bank's managing director, Australian mortgages, Greg Cramm, who was controller of retail banking in New Zealand from 1993-96. Australian bankers' assessment of retail banking over the past 10 years is low, so it can be assumed Mr Cramm was another to move up the tree as a "state" (branch) chief executive.

The UK's Lloyds Bank wholly owns the National Bank of New Zealand. It may treat New Zealand as one of its overseas "branches" but seems to have enough sense to keep locals as chief executives.

That does not mean the London-based owners fail to exercise control over New Zealanders' performance. It can be assumed they want an appropriate return on investment.

NBNZ may say little about its activities but it is a quiet power in New Zealand. Chief executives have a history of getting various honours, whether the former imperial-based knighthoods or newer awards under the New Zealand system.

International oil companies, insurance groups (now known as financial services organisations) and utilities have long considered New Zealand an overseas branch. They move executives from country to country as the former rise through the hierarchy.

Changes to directors of the New Zealand Refining Company, for example, are usually the result of the oil companies' approaches to company promotions. Board representatives are changed when the oil companies, which are the major shareholders, move the local chief executive on to greater things.

Most of the insurance-managed funds business is overseas-controlled, irrespective of how many New Zealanders run local operations.

The movement of people in and out of the country is a two-way process, seen in the many New Zealanders who have gone elsewhere, whether as part of a company executive structure or on their own account.

New Zealand shareholders have little control over most significant locally-based companies.

The Shareholders' Association is trying to change that by creating a fuss when it perceives inappropriate behaviour that could have a deleterious effect on small shareholders. Its chances of victory are limited in cases where an overseas shareholder has majority control, unless it accepts the association's proposals are part of a PR reaction to avoid public shaming.

That will continue to happen while ownership situations make New Zealand an effective branch office.

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