Directors’ Duties, Infrastructure Commissions and Political Dogma

I’m old enough to have experienced a significant number of governments in power. Left-wing, right-wing, coalitions and the like. At my age, my neck is perennially sore from the whiplash caused by subsequent governments focusing on undoing legislation their predecessors implemented.

This is, of course, not just a New Zealand thing. Many of us felt real hope with the election of Barack Obama as United States President. His Affordable Care Act (Obamacare) seemed like the signal that at last the US might get a health system that was, if not fair, at least a little less unfair. Who were we to know that only a few short years later Obamacare would be (kind of) undone as the new lot spend political cycles undoing the change?

I’ve been thinking about the yo-yo-ing of the US health system lately as news comes that a piece of fresh legislation here in New Zealand is set to be changed. To explain what’s going on, I need to take a quick dive into the exceptionally fascinating world of directors’ duties.

Put simply, until very recently, directors of organizations had simply (not that being a director is in any way simple) to act in good faith and in the best interests of the company. That seems fair enough, right? Step up Duncan Webb, the Swandri-wearing labour MP who introduced a private members’ bill which codified a departure from this duty by encouraging directors to think about environmental, social and governance (ESG) factors when making their decisions.

Essentially the bill (which eventually was voted into law and hence became an act) ensured that directors would consider a far broader stakeholder group than simply shareholders—instead, society and the environment needed to be considered in their decision-making.

Now many people argue that this legislation wasn’t necessary and that any company director who ignored societal values or environmental degradation was unlikely to be a good steward for his or her company. The theory went that if you ignored those other factors, you’d soon start to degrade the financial performance of your organisation as well. Other people pointed out that directors already take that stuff into account – partly because there is a more mature approach towards corporate governance these days but also, and more directly because customers care about people and the planet and hence it’s simply good business to focus on these areas as well.

Still others pointed out that simply enshrining into law verbiage that tells directors that they can take into account more than simply profit when going about their duties does absolutely nothing to ensure that they will do so. In other words, some people suggested that beyond virtue-signalling, the act was a waste of space on the statute books.

Another area in which we’ve seen political whiplash is in successive government plans for infrastructure investment. You’d have thought that when assets such as roads, hydro dams and electricity transmission infrastructure have a multi-decade lifespan, not to mention a multi-billion dollar pricetag, we’d have a multilateral approach towards making these investment decisions.

Instead, we have successive governments apply their own bias to these decisions. Governments that bend to the left double down on public transport, green energy and a regulatory framework that is fundamentally about making it harder to get infrastructure projects across the line. Governments that lean right do the opposite, building roads, encouraging more traditional fuel and energy resources, and making it easier for stuff to get done (and damn the torpedoes or snails).

I am not going to take this opportunity to opine one way or the other about which of these decisions are right. I have views about corporate governance and the ever-changing duties that directors hold. Equally, I have some thoughts about the roads versus public transport debate. However, as a departure from my norm, I’m not going to espouse them here.

Rather I’m going to shout from the rooftops for something more fundamental: a long-term plan in which we the people (who, after all, elect the politicians) have a say in creating. A plan that starts from the very simple question of “what sort of country do we want to live in?” A plan that is formed with transparency for people about opportunity cost and the give-and-take that comes with policy development. A plan that sees us actually understand that we absolutely have rights as citizens, but we also have a corresponding obligation.

People sometimes joke that what New Zealand needs is a dictator to simply make the decisions and get on with things. While I’m a bit of a fan of democracy, my aching neck would probably appreciate a benevolent dictator.