Mark Stewart’s objection to independent director status for Abano Healthcare director Trevor Janes raises a question the NZX ought to have answered long before now. Some time soon the question will force some hapless business people to  enrich some court lawyers, and puzzle the judge.

The question is what does “independent director’ mean, in the Listing Rules? What are they trying to achieve by Listing Rules 3.3.1 to 3.3.1B ? What mischief is targetted by the ‘Disqualifying Relationship” definition ?

Of course executive directors are not independent. But why should a director not be independent if he/she has a “direct or indirect interest or relationship that could reasonably influence, in a material way, the director’s decisions in relation to the Issuer“.

 I hope they have lots of interests that influence them in relation to the Issuer and their duties. Those interests should lead them to decide as firmly  as they can in the interests of its owners – the shareholders.

OK, that could be fixed easily, by inserting a couple of missing words. The interests they’re talking about are interests adverse to the interests of the company as a whole, or of the shareholders generally. But then it adds nothing to longstanding company law.

But the other provisions are harder to understand. They’re so mysterious I can’t work out what the Exchange is worried about. They seem to work in the opposite direction to what company law (fiduciary duties) try to acheive. They work against directors who might put shareholders interests first, but the Rules don’t say whose interests the NZX prefer.

Directors with a substantial shareholding are suspect (and those associated with such people).

Why?

The research literature, as far as it goes, suggests that the risk of companies being run in the interests of the staff, or underperforming, decreases when there are concentrations of shareholding. It seems to be associated with having shareholders with enough at stake to make it worth their while to stand up to dozy or self interested incumbent management.

There is always pressure on directors not ot cause a fuss. Especially if the Chairman has developed a comfortable relationship with the CEO, there can be overwhelming reasons to go easy on management, not to rock the executive boat. The Chair usually has a strong influence on renomination for election.

I can understand a concern to exclude directors from the ruling council when the shareholder they represent has something under way that conflicts with the interests of the other shareholders – like a related party deal involving the company’s assets, or a takeover. But the minority shareholders’ interests go the other way when the transaction under review benefits, or threatens the major shareholders and the minority similarly.

I want Directors who have “relationships and interests” that will help them be tough and diligent. Exclude them of course once the interests conflict, but that is what ordinary company law does, and is not what the Listing Rules do.

It seems to me that Trevor Janes should be involved in fending off Mark Stewart, or ensuring there are at least competing offers.

Disclosure – Trevor Janes is a friend as is Alison Paterson (Chairman of Abano) but I have spoken to neither of them on this matter, and I have no inside knowledge of the Abano situation.  

What kind Minister of Finance thinks it an insult to accuse somone of being rich, and in what kind of country could that work as an insult?

Not surprisingly I’m asked why I want to be the National candidate for Wellington Central in 2008, rather than standing for ACT.

Its simple. I want to be effective.

Last evening was one of Wellington’s most beautiful. The harbour shone. I could see people ambling on Mt Victoria above. Cathy’s new deck in the evening sun seemed to be about the best place to be in the world. I’d just walked home past the sipping and laughing in Courtenay Place’s street cafes, and I knew that down below there would be a splashing, strolling, eating crowd at Oriental Bay.

Yet in Parliament, out of the sun and light, the iniquitous Electoral Finance Bill was being forced through.  I can’t just put aside the corruption by power of those now running this country. Many lucky peoples in history have praised themselves and each other and sung and danced while their children’s futures were mortgaged to wiser neighbours. 

I’ve tried to do my bit from the side, as a lawyer. Among the hours of voluntary work I recently created the trust deeds for David Farrar’s Coalition for Free Speech, and then for John Boscawen’s team.

But there is so much to be done, and for 6 years I was paid as an MP to work on causes I was passionate about. Now I spend my most productive hours working on client matters, advancing their passions.

I think of the weekend’s front page DomPost headline “NZ Stuck as Other Nations Prosper “. I think of last week’s Coroners’ Court revelations of incompetence in the Police, of Corrections’ deep-seated leaderlessness that allowed Graeme Burton to murder Karl Keukenbecher, and for breakfast today Wellington Hospital’s decay is the main course. Politicians who created the hopeless structure are now dumping on the dedicated souls trying to keep it all going.

I’ve always loved being a lawyer. I’m no hair shirt ascetic. I like the income and the choices it has given me. My family have liked them more than politics. But I can’t get rid of the feeling that my 6 years in Parliament were an apprenticeship. It will be wasted if I do not try again.

So how best to do that?

I’ve long been asked to stand for National by members around the country. I got into media strife before the last election by honestly answering a question about that. Though Richard Prebble kicked all that off by polling ACT members on joining National, I believed then that the parties should not even attempt a merger. I believed that the shared causes would be better served by a coalition, and the areas of difference could just consume energy if the parties were forced together.

The election confirmed what I knew from my inbox and voicemail.  Most of my supporters had moved to National. I could not blame them. National’s stated principles were mine anyway.  Right from the beginning my maiden speech in Parliament owed much to former National Prime Minister Sir John Marshall’s maiden speech.

Now ACT is the personal fiefdom of its leader. That is the nature of parties hanging off a personal seat.  I wish him and them well. He will continue to contribute something unique and often valuable to Parliament. But MPs in those parties have to accept that they are hitch-hikers. They must laugh at the leader’s jokes, and skip in step with him, even if the leader can’t skip, or changes step without warning.

I am sorry to disappoint some of the outstanding people who helped me so much when I was in Parliament, who have not, or could not shift to National. If I can help to restore integrity to Parliament I hope that will be a compensation for them.

I’ve had enough of being told what to do by this government. I have a lot of faith in the National leadership team of John Key and Bill English. My first contact with John was telling. He came across in the House and introduced himself, then asked me to let him know if I thought he was heading in the wrong direction on any matter where my commercial/legal background helped.

I can think of very few politicians with that readiness to listen, or to disclose to a ‘competitor’ that they might need advice. From my observation what you see is what you get with him – an intelligent, determined man doing what he is doing for the same reasons as me, a drive to work for the country he loves.

Over the last year representatives of three provincial National electorates have sounded me out to stand for them. One electorate has sent seductive pamphlets and photographs, and suggesting enticing legal work. It’s flattering, of course. But Wellington Central has been home for me and my family for more than 30 years. I was born here, brought up in Taihape (no-one can out-ethnic me!) and came back to Wellington for University.

I’ve loved living here. This is my stamping ground. I work, bike, and walk here. I’ve sailed and kayaked and tramped everywhere you can in Wellington. Every year it seems more beautiful and more stimulating. Cathy and I have fought two campaigns in Wellington Central and I think our volunteers enjoyed it as much as we did. We know every street for deliveries, how to get into the mailboxes of the high-rise apartments, and the leafy drives of the northern suburbs.

We’ve been involved in many Wellington organisations over the past 30 years, ranging from my nearly 10 years on the Marsden School Board to a recent appointment as chairman of Wellington Rugby League.  There are so many excellent groups in this city but ones we like supporting or promoting at the moment include those for young people, such the Wellington Youth Orchestra, the Affordable Art Trust, a number of sports clubs and their emerging sportsmen and women, as well as favourites like the Karori Sanctuary.

The best way to help me is to join National in Wellington Central at www.national.org.nz . National electorate selection rules allow the locals to select their candidate when the electorate membership crosses a threshold. Wellington’s National electorate needs more to do that. If you can do that small thing for me I’d be most grateful.

To contact me email franks.lawyer@gmail.com   The calls so far from people wanting to be part of my campaign are very much appreciated.

I’m on Youtube with an off the cuff speech against the Electoral Finance Bill.  Heckling by Young Labour.

I’ve just come home from my second “office party” of the weekend. This one was not really an office party. It was the Chapman Tripp Theatre Awards dinner. But “office party” was how one prize presenter aptly described it, based on the audience knowledge of (and warm applause for) all the finalists, and the MC’s comfortable confidence that the audience would understand the sly roasts and in-jokes.

I had the pleasure of hosting a Chapman Tripp table.

Wellington rocks. We have such a richness of theatre.

Home Land, the Play of the Year won lengths ahead of any other. Its lead, Grant Tilly, took the Actor of the Year. The playwright (Gary Henderson) and director (Jane Waddell) each took the awards for their categories.

Grant Tilly devoted much of his acceptance speech to lauding playwrights, and winding up the young actors by claiming that playwrights are more important than actors. [He has since clarified in a note – “…actors are interpretative artists, or re-creative artists, and playwrights are the creative engines of the theatre”.]

But I still feel robbed. Years ago I missed the award night when Grant Tilly plainly got close to vomit mode after acceptance speeches protesting each prize as a tribute not for the recipient but for the cast as a whole, the crew, the sponsors, Mother and Father, devoted partners etc ad nauseum. 

Tilly opened up when his turn came on the podium, saying his award had nothing whatsoever to do with anyone else, that it was full credit to him, not even his Mum had anything to do with it, that he owed nobody else any grovelling gratitude, that they would all have to do much better to deserve anything similar etc. Though tongue in cheek it set the evening alight.

Winding up the youngsters by comparing them with playwrights was good, but not quite so memorable.

The other office party was on Friday at Athfield Architects above the Hutt motorway. Again it was not billed as an office party, but it became clear that we were privileged to be allowed in without a costume befitting an invitation to join the ‘Good, the Bad, and the Architects’. The tex/mex result suited the wonderful adobe ‘mesa’ levels that so intrigue as they step down from Amritsar St to Onslow Road, just above the Ngauranga road.

TexMex is just the best fancy dress theme. Most of the women looked beautiful before they started. In the range of gear allowed by that theme, in the brazier firelight, few did not look look fantastico.

How fortunate that  Ath became our foremost architect and turned his imagination into a concrete and fibreglass maze, before the taste and style police in the WCC could emasculate him.

The Attorney General is telling the Herald to suppress its old stories on the man accused of murdering Emma Agnew. I hope the Herald tells the Attorney General to stand up for a change for freedom of speech and open justice.

The law around pre-trial contempt of court (and sub judice) is based on the theory that the risk of biasing judges and juries outweighs freedom of speech, including open disclosure of what is known  and obtainable by insiders, or those determined to find out.

I am not aware of any balance of evidence to support the fear that  judges and juries will not be objective about evidence tortuously unfolded in court, without  bias from pre-trial publicity. The trial will be months later.
Juries report that the deliberate pace in the court is an overwhelming influence on their preconceptions. The process steers them to fresh appraisal. 

Indeed the attempt to treat juries like computers, cleansed of any pre-knowledge, and sheltered by evidence exclusion rules from anything a judge patronisingly considers prejudicial, turns upside down the original justification for a jury of your peers. In origin the jury were selected for their knowledge of the accused and the accuser, to judge truthfulness with their own knowledge as neighbours.

One would not necessarily press for a return to those days, but it is high time for the courts to step back from the arcane rules that abort trials.

There are risks in gagging orders. The precedent is bad. Secrecy engenders conspiracy theories. I have never seen a rigorous attempt to weigh the risks of court bias, against the risks to the courts and their reputation of gagging attempts.

Insiders like knowing things nobody else can know. Judges are not immune. The whole openness of the internet, with its anarchic speed of access to arcane information makes them nervous. Like doctors fearing self diagnosis and on-line drug purchasing, they fear the “abuses” and mistakes people will make when armed with ‘dangerous information’. Neither profession weighs their fear against the upside. Free debate and argument enable better understanding by lay people. Mistakes can be avoided (e.g. fresh witnesses come forward). More importantly, when lay people are better informed it increases the pressures for better performance by the experts.  

The Attorney General’s office (Crown Law) has a lot of ground to make up after its ludicrously craven ‘opinion’ on the Electoral Finance Bill, and the apparent failure to warn the Police of the deficiencies in the anti-terrorism law. It is time for them to take to the courts a robust challenge to any preciousity. If the courts persist, the Attorney General can ask Parliament to send them a legislative message.

After the public service rendered by the Fairfax papers in releasing details of the Tuhoe sedition the Attorney General should be showing leadership. The Police, the Government and people are better off for not remaining in the dark about the basis for the raids and the charges. I can not imagine the disclosures now having an efffect on the eventual finding of guilt or innocence any different from disclosure in court.

Only racist organisations (like the Anglican Bishop who saw Police racism before he knew the facts) and the defendants who will have their day in court to explain the material away, are discomfited by the premature disclosure. The Attorney General should be preparing to argue fiercely in court that the courts have no warrant to assume prejudice, to ensure the defendants can not capitalise on the recent fad to elevate privacy and possible embarassment over substantive justice.

How can he make that argument if he is asserting the opposite against the Herald now?

 My post about Capital + Merchant Finance hitch-hiking on Lloyds’ good name did not predict their collapse, though being cute or cunning in advertising is on my very short list of tips for knowing when not to invest.

Lloyds should be worried. If I was one of the 7000 investors who might have been mislead by the appearance of Lloyds’ support I’d be looking for a way to draw them in. Their pockets are deep. 

The big fat law about to be unleashed to regulate investment advisers is a waste of time. I had not heard solid rumours about C + M but there are now claims that ‘everyone knew they were in trouble”.

The government should be asking pointedly why, if that is the case.  Is the market too scared to speak openly, so that rumour benefits only the insiders?  Markets are supposed to process imperfect information.  They impound rumour and opinion into prices.  That is the main claim for the superiority of market systems.

Have our naive laws around market information nobbled them in their main function?  Is it defamation law’s gagging effect?  The law is supposed to exempt statements of opinion, but the huge costs in successful defence may be suppressing free speech.

I suspect that the investment adviser law that the the Hon Lianne Dalziel is just about to pass will make the problem worse, by sending the message that it is legally risky to talk about investment matters at all.

The Ministry of Economic Development has become a Beckham of own goals in Securities Law matches.

Anyone can get 70% of the value an ordinary investment adviser adds by following 3 simple rules – spread your risks, spread your risks, and spread your risks.

Another 20% comes from remembering:

•  high return = higher risk;
• long reputations are usually better than short ones. 

On the other hand there are a few investment advisers who are worth more than you’ll ever pay them. Who they are is hard to know in advance, just like lottery tickets. Nothing in the new law proposals is likely to help you win lotteries.

The Waka Umanga Bill is designed for a niche in the legal product range. It is supposed to offer iwi and other Maori groupings a more culturally sensitive template for governing themselves. I think its market is potentially much bigger. There is a gap in the product range of collectives. With a bit of refinement this Bill could fill that gap neatly.

To become another Maori gift to the nation it needs some clear-eyed pruning, some expansion to offer  practical model documents, and the deletion of its racist exclusivity. All three would improve its performance for Maori as well.

 The whole legal product range for governing collectives and managing communal assets must satisfy a few common purposes. They should let people know, in advance (i.e. without needing to spend money on lawyers in dispute):

who are the members;

who is in charge;

what the bosses are supposed to be doing with their power (the purpose of the collective);

how far outsiders can treat the bosses as if they owned the collective;

who is liable if the collective hurts outsiders;

how the bosses are stopped from diverting benefits to themselves and their families, at the expense of the rest;

how to change the bosses when they need to be changed, even if they do not want to go.

The great task of good law for incorporations is to overcome the communal blight – when everybodies’ business becomes nobodies’ business. Each individual member has a small ‘investment’. Only those enjoying power have much at stake individually. Accordingly it can take a long time for the members to revolt.

On the other hand expanded rules and procedures to stop those in power from abusing it often condemn the organisation to endless politics, driving away managers with initiative.

The limited liability company gets as near to solving this insoluble as anything ever has. It has been described as more powerful than the steam engine -Anglo American law’s greatest contribution to ending poverty and famine around the world.

They solved the power/accountability problem with the cake cutter’s knife. When the cake cutter must take the last slice, the portions are always fair.

Under classical company law, the owners (and the directors and managers as stewards on their behalf) have absolute control of the collective assets. But they can not take any benefit until all the other stakeholders have had their contractually defined slices of the cake. The owners get only what is left, called profit.

It can be very large, or negative. When it has been negative for long enough to use up the equity cushion, insolvency hands control to stewards for the creditors. Ownership passes to new hands.

Absent dishonesty the stewards are not liable for decisions and risks that go wrong, but on the other hand the owners could sack them without interference from the law. 

The genius of the solution has always been atacked by well meaning folk who prefer more ‘inclusive’ rules. Yet the world-wide triumph of collectivism under that Anglo-American model , contrasted with the miserable corruption and disappointment of most other collective management models, has always drawn even those who hate symbols of capitalist success into attempts to  hybridize the company form.

Is the waka umanga another of those attempts?

Perhaps, in its genesis, but that does not mean it is unnecessary, or a bad idea.

It has legitimate purposes. The company form works best when the objective is simple – increasing the wealth of the owners, after paying the contractual stakeholders (workers, customers, suppliers) what they are owed.

We have had unprecedented years of integrity in our collectives. That has depended on the courts measuring bosses by asking if they were acting in the interests of members. If the bosses are give multiple conflicting objectives it becomes much harder. They can disguise and excuse non-performance. Nevertheless the question is still relevant.

But there is a class of collective where the benefit of members is simply the wrong question.

For waka umanga the ‘wealth’ of its members may be secondary to their desire to ensure the strength, persistence and power of the entity itself. Members at a particular time may have to sacrifice their own interests for the longer term good of the collective. Company law duties and tests do not work properly for such organisations.

Nor do the other possibilities – trusts, unincorporated associations, incorporated associations, building societies, friendly societies, credit unions, co-operatives, industrial and provident societies. They are all an awkward fit when the purpose may be the glory of the organisation itself, and the mana of future members, above the measurable interests of the members at any particular time.

Many organisations could be better served by the waka umanga form, if it deals properly with this issue.

Most churches, for example. They are there for the greater glory of their respective gods. The benefit of their members may be a by-product of serving the god’s church. The poor fit of the law of corporations to churches may have helped make them a happy hunting ground for fraudsters. Churches work very well for the Tammy Bakers and other ‘bishops’ who decide what the god wants.

If the waka umanga emerges from Parliament properly focussed on its key tasks it should be a model much in demand. There is a risk that it will retain so many well meant encrustations of process that few will be bothered to use it. The Bill is overloaded already with some of the most irritatingly useless features of modern company legislation, plus a few extra drawn from awful local authority law.

Simplification could create an example for us all. I hope that the production testing and de-bugging is not seen as something of interest only to Maori. Pakeha should take a close interest, without apology. After all, the company is a pakeha taonga. If Maori can polish it and give us a fix for one of its weak areas, we’ll all benefit. 

” Absolutely not” is my answer when asked whether being a back-bench MP was frustrating. There was plenty of constructive work to do. Not many Bills went through my Select Committee that I could not improve. Sure, it was usually in some minor clarification but even that could save an unlucky pair of citizens from wasting at least $50k (and up to $1m) in court against each other getting a judge to say what a new law means.

The whole point of the rule of law is that people can know in advance what the rules are. I gain great satisfaction from making sure that some of it did that.

Sue Bradford’s Member’s Bills are hugely influential. I think most of it is damaging, but I endorse Guyon Espiner’s nomination of her as backbencher of the year. He says she’s had more impact than many Cabinet Ministers.

Sue Kedgley’s Bill to give a ‘right’ to unpaid leave is also succeeding. I have a guilty secret. In 1975, as an assessor nominated by the Clerical Workers’ Union for award negotiations, I put a right to unpaid leave in our log of claims. I thought it would be good for women, but I rather thought I’d like it as well. It lasted till we had a planning session shorlty before negotiations started. The Union Secretary – Dave Jacobs, hit the roof whe he saw it. “We fight for paid leave, not unpaid leave” he growled.  And it was withdrawn from our claim.

And this week another Green Bill was drawn in the ballot for Member’s Bills. Some statistician should check the record, to see by how much the Greens have beaten the odds. Perhaps Gaia is fiddling with the randomness of the Parliamentary Clerk’s ballot.

Let me be the first to predict a topic for a Green Bill sometime soon. They flourish on fears, some better founded than others. This week’s Economist offers one I’d never heard of before – nanotubes. Apparently there may be risks in tiny particles that no one has been able to assess. They could include the titanium dioxide in your sunscreen.

What will the Cancer Society do about that one?

Here is a link to the Youtube video of my speech at yesterday’s rally against the Electoral Finance Bill. it was off the cuff as the main speakers couldn’t come (a plane overturned at Wellington airport).  David Farrar and I were asked to fill in.

The video recorded points I could never make as crisply in writing.  Heckling is by Young Labour who tried to hijack the march.

Thanks to Andrew Falloon for sending it through this morning.

http://www.youtube.com/watch?v=XMy8IWP_WLw

What I heard from Jeanette Fitsimons yesterday confirmed my fear that they are dishonouring Rod Donald by their stance on this bill. As I heard her, freedom of speech and political association and action is subordinate to the class war.

He strongly favoured government funding of political parties. He was concerned about the possibility that moneyed conspiracies could buy elections. It is not established by research, but I accept the possibility, and therefore do not oppose the reassurance of law that requires parties to disclose major donations.

But he was a student of constitutional history. I wrote my first Select Committee minority report on  the Waka Hopping Bill, opposing it on Burkean grounds. I then found that Rod Donald agreed with almost every word, so we made it our joint report.

We sat together on the MMP Review committee, and collaborated to try to get the others to make it more than a ritual.

Sure – he shared the Green commitment to socialism above greenery and the environment, but I think he would be insisting now that this Bill go out for fresh submissions.