Great Expectations: What shareholders and directors expect from New Zealand public company boards

One of the key roles of corporate boards is to decide how the cash generated by these companies is distributed, and through these decisions they influence the wealth of many in our society. But beyond this task what is expected of corporate boards? Although researchers have spent decades examining boards, a general consensus regarding the objectives and tasks that they should perform has yet to emerge. Using a combination of primary and secondary research, this study examines the expectations that shareholders and directors have of corporate boards in New Zealand and identifies some concordance between their views and some of the extant literature. These findings highlight the contingent nature of corporate governance and provide guidance to both practitioners and future researchers. New Zealand public companies were selected for this study because their directors and shareholders remain open to sharing their views and experiences with external researchers. New Zealand uses a straightforward variant of the common Anglo-Saxon corporate governance model so there is some potential to generalise to other contexts. Developing the foundation for this research required refreshing and extending the extant research concerning aspects of the NZ commercial environment including company ownership and control, shareholder and director demographics, and the underlying commercial environment. Subsequently, a mixed methods approach was adopted for the core study which included conducting focus groups and surveys with both shareholders and directors. Data were also derived from secondary sources including, company annual shareholder meeting minutes, the Companies Office’s records and the social media website Linkedin. The research finds that while both directors’ and shareholders’ expectations of boards are broadly aligned, the expectations that both groups have of boards are heterogeneous in some key respects. Interestingly, the diversity of opinion that appears to exist within each of these groups tends to reflect the diversity that is apparent within the governance literature. Socio-economic factors including the influence of ‘women on boards’ lobby groups and company specific environmental factors such as a company’s financial position were identified as some of the influences which contribute to this diversity of opinion. Environmental factors not only appear to influence the opinions of directors and shareholders but also appear to influence other aspects of corporate governance such as the selection of directors, and the tasks that boards choose to perform. This suggests that a pragmatic rather than a doctrinal basis for this heterogeneity is applicable. So rather than boards adhering to a specific pre-established framework such as ‘shareholder advocate’ or ‘company controller,’ corporate boards appear willing to adjust their objectives and practices to meet the circumstances at hand. For researchers, these findings emphasise the importance of considering contextual factors when designing corporate governance research projects. They also highlight the importance of understanding stakeholder motivations when applying common governance theories. From a policy perspective, the findings reinforce the advantages of the ‘comply or explain’ approach to regulation and they add caution to making local and international best practice guidelines mandatory