NZSA Disclaimer
New Zealand investment commentators, shareholders and the media have commented at length on the situation at NZME over the last couple of months. That includes, of course, NZ Shareholders’ Association in our initial reaction to the removal of the existing Board proposed by 10% shareholder Jim Grenon, replaced by his proposed nominees as independent directors.
Over the following weeks, we refined our concerns to focus on maintaining board independence for small shareholders, ensuring that (whatever the outcome) NZME’s Board would have the right composition to support the skills required to govern the company and lastly, a focus on information for shareholders. We also encouraged an outcome that saw some degree of Board continuity – allowing an effective retention of the institutional knowledge required to create stability and minimise disruption for the company and its shareholders.
The company delayed its shareholder meeting on March 31st, allowing time for proposals and counter-proposals to be considered, and for information to be presented to shareholders. This delay also enhanced the probability of a stable Board succession, an outcome arguably supported (even if unintended) by the immediate resignation of existing NZME director David Gibson on April 15th.
On Friday came the clarity that many, including NZSA, had been seeking.
The proposal to be put to shareholders at the Annual Shareholders’ Meeting will see resolutions for two new directors – Steven Joyce and Jim Grenon. Three existing directors, Sussan Turner, Guy Horrocks and Carol Campbell, are likely to remain on the Board, with Sussan Turner required to offer herself for re-election at the meeting. While not a resolution at the shareholder meeting, Carol Campbell has also indicated that she will step down in the near term after a suitable director has been found to replace her on the Board and as the Chair of the Audit and Risk Committee.
Current Chair, Barbara Chapman, will resign at the end of the shareholder meeting.
Directors are likely to appoint Bowen Pan, a technology expert, as a director following the ASM (shareholders will be required to vote on his appointment in 2026).
An Elegant Solution
There is much to commend for all parties involved in developing this outcome.
As time progressed, it became clear to NZ Shareholders’ Association that Jim Grenon was displaying a quality that is understated in its importance for all directors – an open mind.
Grenon may have some firm opinions and idea about what he wants to achieve at NZME – in particular, the implementation of an Editorial Board (confirmed in Friday’s announcement) and a review of the company’s cost base, as outlined in his various shareholder letters. But having kick-started this particular bout of activism, he also then demonstrated a willingness to create a solution to allay concerns expressed by the broader shareholder base and to align with governance best practices.
Barbara Chapman also deserves credit. By her resignation, she has acted in a manner that supports the best interests of NZME, at the expense of any self-interest. That may be what shareholders expect – but to do this in the most trying of circumstances, while sacrificing herself on the altar of governance, is a true demonstration of her independence. To set aside self-interest and stand aside at the right time is in itself a key act of leadership; regardless of your views on politics, many will remember Andrew Little standing down as leader of the Labour Party in 2017 as the most decisive act in creating the conditions for Jacinda Ardern to thrive in the subsequent election.
NZ Shareholders’ Association had discussed the possibility of a ‘blended solution’ with all parties, as being in the best interests of the company. Following the initial announcement earlier in the week, related to the nominations process, NZME’s 20% shareholder, Spheria Asset Management, noted that the company now had an “embarrassment of riches” .
NZSA believes that the resultant (likely) Board represents an elegant blend of those riches, balancing institutional knowledge, innovation and change into a recipe likely to provide a rewarding future for shareholders.
Future
Following the meeting, it is the role of the Board to elect a Chair, rather than shareholders. Nonetheless, the stated intentions of each party are critical to consider for any voting shareholder, and indeed, NZ Shareholders’ Association encourages transparency of succession plans when it comes to both Chair’s and directors. It would seem that Steven Joyce is regarded as the Chair-elect by the likely Board. This is a situation where his former political role is incidental to the significant media experience he had developed prior to entering politics.
From a governance perspective, the independence of Steven Joyce is a key factor in our support for him as Chair, as compared with Jim Grenon. By dint of shareholding, Grenon would have been a non-independent Chair. This is not to say Grenon has no value as a director just because of his independence status; we have commented previously that while NZSA supports a majority of independent directors on a Board, we are mindful of the unfair negative perception attached to non-independent directors.
NZSA believes that in practice, Grenon not performing a Chair role will enable him to undertake a key role in pursuing the opportunities he has mooted, with subsequent benefits for shareholders. Friday’s announcement also confirms the establishment of an Editorial Board – a key proposal put forward by Grenon. From a business/operating model perspective, we are pleased to see that there is ‘separation’ from the company’s Board.
In previous assessments of NZM, we have commented on the poor quality of Board skills disclosure and their relationship to the skills required to govern the company. We have also commented on the relatively poor disclosure of CEO Remuneration, which conflates payments from multiple years into a single figure without providing further detail – this lack of disclosure was also highlighted by Grenon as part of his initial letter to the Board and was a key example in NZ Shareholders’ Association participating in the development of the NZX Remuneration Reporting Template, released by NZX in late 2023.
Interestingly, most companies have shown significant improvement against the disclosures that we have measured since 2021. NZM’s improvement has been more muted.
We think that there is significant scope for the incoming Board to reconsider the disclosure associated both of these core elements.
From NZSA’s perspective, we look forward to a higher degree of engagement with the company (and its Board, including incoming Chair Steven Joyce) than we have had in the past to ensure that it keep delivering for all shareholders and continues to represent the interests of individual shareholders.
Oliver Mander