Air NZ and the “national interest”
I shouldn’t be surprised that it is top business and political journalist Fran O’Sullivan who covers the near illegal orders the Government has given Air New Zealand. So many journalists wouldn’t know about the Companies Act. Fran writes:
Air NZ – in which the Government holds a 76 per cent stake – is not a state-owned enterprise.
But Cabinet ministers … now seem to believe they can order the publicly listed company to uphold non-specified “national interest” considerations.
Under the Companies Act it is clear that majority shareholders do not and cannot direct the company. Air NZ directors have fiduciary duties to run the company in the best interests of all shareholders – not to suck to the majority shareholder who appoints them.
Air NZ shareholders deserve to know a lot more about the Government’s definition of “national interest” and how any strictures will affect shareholder value.
But the NZX should be issuing “please explains” all round, given the huge number of uncertainties now on the table.
No shareholder – even a fabled “plaintiff of convenience” – has yet emerged to tackle the Government’s blatant interference in Air NZ’s business for what are really political ends. But if the Government continues down this capricious path, other Air NZ shareholders will get stroppy.At issue is, if the minister had known of the charter would he have advised Air NZ not to proceed? If so, what ramifications would this have for the company’s revenue? Would this have been a breach of Air NZ’s requirement to make continuous disclosure to all shareholders? And what ramifications would it have for the interests of other shareholders?
These are all good questions. Air NZ is obliged by law and NZX to treat all shareholders equally. If any market sensitive information is shared with Dr Cullen in their monthly meetings, then Air New Zealand Directors may be in the gun.
August 22nd, 2007 at 8:22 am
The minority shareholders have every right to feel aggrieved that the majority shareholder has essentially prevented the airline undertaking profitable business because of a political problem with John Key and the National Party. Nothing could be more remote from the best interests of the airline. Furthermore it is only just recently the Government has decided to make Iraq a political issue against John Key. Not surpirsingly shares in the company have dropped but that would not worry the Labour Party they have frequently been reckless with the value of shares in the sharemarket.
August 22nd, 2007 at 8:23 am
Yes, good question. They will not be answered of course. If the government feels so inlcined, they may address them, but they won’t answer them.
Any bets on whether the NX will have the balls to ask, publicly?
August 22nd, 2007 at 8:34 am
[I am repeating this here because the measure of unrest this has caused is increasing still not decreasing.]
We feel very insecure and shocked that this has come from a Labour Government who traditionally looked after us reasonably well.
Our loyalties to the ministry has remained but two problems have occurred which have been forced a rethink by many of us as to the current Government.
1) Setchell-gate- (our political neutrality has vaporized)
2) The interference in legitimate activity i.e. Royal Koru Air Force et al.
August 22nd, 2007 at 8:44 am
The Prime Minister and her cohorts ignore the Electoral and Crimes Acts with impunity. The Companies Act doesn’t come into their ken.
The Empress can do no wrong as history shows.
August 22nd, 2007 at 9:23 am
If not the NZX (which owes its existence to the patronage of govt so don’t expect any joy there) then where is the usually very vocal Bruce Sheppard of the shareholders Assn or other defenders of shareholders such as Gareth Morgan or Brian Gaynor or Roger Kerr, soem of whom were very vocal on things like Fay Richwhite and Tranzrail?
Seems a lot of people are keeping their heads right down
August 22nd, 2007 at 9:24 am
More and more these wretches seem to be treating the New Zealand government as a dictatorship where existing laws can be trampled, and new ones granting them more power rammed through in their place.
Election year cannot come soon enough. We need to take back New Zealand and I think its time we had a Constitution to keep it ours. We simply cant trust the politicians not to abuse their position.
Helen & al. are not above the law.
August 22nd, 2007 at 9:32 am
So this is a civil matter: some shareholders should immediately sue the CEO of Airnz for breach of fiduciary duty.
Civil Servant is right: the mood in the bureaucracy is ugly. You can’t get hired unless you are a Labour lackey – but everyone in the ministries are scared sh*tless of what the Nats will do when they are in govt. The savviest operators have already got out to the UK or to the Labour states in Aussie – some other are hoping Kevin Rudd will make more jobs in canberra – and the rest are hoping on their super.
the sad thing is that even polling at 53% National doesn’t undestand MMP! because if it did we’d have Winston as foreign minister, Dunne as revenue, Ron Mark as defence, Pita Shrples as Maori affairs, Jeannette Firtzsimons as environment — and John Key as PM and Bill English as Finance.
today.
August 22nd, 2007 at 9:59 am
“the sad thing is that even polling at 53% National doesn’t undestand MMP”
Yes, I’ve thought the same thing. Although the desperate minor-party rats may be clinging to the sinking ship more tightly than would any thinking rat. I wonder if JK has offered them food and shelter insead of the election burrial that seems to be looming
August 22nd, 2007 at 10:51 am
There is enough prima facie evidence in the public arena to cause both the Secruities Commission and the NZX to be undertaking investigations in the matter.
There are questions of continuous disclosure improper shareholder activity and potential breaches of Sections 130 thru 138 of the Companies Act.
If the SC and the NZX are not currently investigating then we have the added situation of a potential breach by them of their statutory obligations.
Of course nothing will be done as usual. In the small cosy world of NZ business where nudge nudge wink wink is the abiding corporate governance policy.
August 22nd, 2007 at 10:54 am
If you think companies routinely pay no extra account to the views of their majority shareholders you have to be absolutely barking mad. In practice the primary purpose of a company is to keep their shareholders happy – particularly those holding the largest parcels of shares. Just look at Telecom, Fonterra and others. Companies don’t give a damn what legislation says about namby pamby equal shareholder rights, and nor do the commentators until they want to score political points. Air NZ is acting as if the Govt doesn’t own it – which is political in itself – not to mention foolish.
August 22nd, 2007 at 11:07 am
IntangibleBanana
And thats why NZ is regarded as a joke as regards good corporate governance around the world And how do I know Cause I work in the area of corporate governance We are viewed as a light weight.
In other jursitictions directors and others go to jail for years for offences that under our pathetic corporate regime they get a slap on the wrist. Fay and Richwhite would be doing a long stretch of porridge if they had been caught outside NZ Instead they paid some petty cash for them to settle.
I realise its a waste of breath trying to explain why good corporate governance is good business to people like our pollies and civil servants who lack the ethics and morals to understand good concepts universially adopted and followed mean a win win. .
These nutwings are hard wired for a win lose.They win Everyone else loses.
August 22nd, 2007 at 11:21 am
Insider – Gareth M might comment only he’s busy riding his pikipiki across Africa right now and he’s totally agin Bush and the Iraq business so would prob say squat because of that emotional commitment. But it is interesting that the others don’t comment, perhaps they are afraid that if they do they, and their organisations, will be painted with the pro-Iraq war paint HC likes to splash about? They’d rather just keep out of it.
August 22nd, 2007 at 11:23 am
Air NZ asked the government before they went ahead as it required regulatory approval.
As for the shareholders the LABOUR government saved their shares from being entirely worthless, as would have happened under national.
Ask the shareholders of Sabena , or Swissair how much their shares are worth went they went bust.
[DPF: And we are onto Selma's 20th lie for the month. Name the regulation which required govt approval. And also you obviously do not understand shares very well but many shareholders have purchased their shares since the bailout. They are owed a duty under law for the company to look after their interests, not Dr Cullen's]
August 22nd, 2007 at 11:28 am
gd:
“And thats why NZ is regarded as a joke as regards good corporate governance around the world”
As opposed to … say … the USA?
I agree good governance is ideal but in practice it tends to happen only after something goes terribly wrong. Then for a while it improves – and gradually the tide goes out again. A bit like regulation of finance companies.
August 22nd, 2007 at 11:33 am
mavxp: A written constitutions would only be available, if drawn up by politicians and their hencemen. However they are all diong very nicely at the moment with a “collection of documents” purporting to be our constitution.
Anyway scrap the idea the Empress has decreed we don’t need one.
August 22nd, 2007 at 11:38 am
MMP is not a charter for minority parities and I am hopeful a future parliament will address that issue. They have far too much influence at present which is not surprising because the public do not like them much.
August 22nd, 2007 at 12:19 pm
“TIM BARCLAY”
“MMP is not a charter for minority parities and I am hopeful a future parliament will address that issue. They have far too much influence at present which is not surprising because the public do not like them much.”
Um people don’t like the major parties much either, but they’re willing to vote for them, because a) its the traditional thing to do and b) they know that both are willing to pander to the dominant special interest groups i.e. bribe them, in order to get in power.
August 22nd, 2007 at 12:32 pm
“These are all good questions. Air NZ is obliged by law and NZX to treat all shares equally.”
Fixed it.
It is the role of the directors to carry out the wishes of the shareholders proportional to the amount of shares they own. All info that is provided should be provided equally to all shareholders so that they can decide what they want to be done, but it is within the rights of shareholders to request any info or action that they want and the board of directors to yay or nay providing that info on the basis of shareholder interest. When a majority shareholder asks for something to be provided they get it, because what they want is for all intents and purposes the shareholder interest. As long as the info of what is done is not hidden from minor shareholders there is no problem and the minor shareholders can object to the director with the full weight of their minor shareholdings.
If info is hidden it becomes a problem of privilege, but if not this is just a company responding to the directives of its shareholders – nothing wrong with that.
August 22nd, 2007 at 1:07 pm
Nice summary unaha.
Maybe the confusion comes from the mingling of two roles here – Govt as majority company shareholder and Govt as representative of the interests of the NZ population.
Regardless of its shareholding role, the Govt was within its rights to say publicly that it didn’t like Air NZ doing something that might negatively impact NZ’s reputation or the safety of its people. And I don’t think it should have come as any surprise to Air NZ that that was the Govt’s position (not sure why the civil servants didn’t understand that).
August 22nd, 2007 at 3:26 pm
Thermal Bloviate, the gummint should have let Air NZ go broke. That is the way of commerce. The tangible assets would not have ceased to exist and a new set of business people would have come in and bought them up for a song but the business would have continued and prospered or not propsered, most likely with the same competent people at the helm as are there today. Similarly, they should never have bailed out the BNZ in 1987 or whenever.
If you look carefully at Air NZ’s share price over the last couple of weeks you will see you little gang of four’s escapade into cross tasman shit slinging has cost shareholders in the airline a cool $150 million BEFORE the news about Virgin Air broke and cut a further $200 mil.
August 22nd, 2007 at 3:34 pm
unaha-closp – that is one of the more ignorant posts on this topic (except for selma of course).
Publicly-listed companies are under an obligation of continuous disclosure to the NZX. All shareholders – and potential shareholders – are meant to receive all material information at the same time, and immediately it becomes material.
And board do not – must not – respond to shareholder “directives” except if these are made at an AGM or SGM of the company. Otherwise, whose “directive” is to be taken more seriously, and which are “directives” and which are suggestions or comments?
Cullen and the Air NZ Board have almost certainly broken the law here.
August 22nd, 2007 at 3:45 pm
National interest”.. pfft.. Labour Party/ Helen Klark interests. Today’s socialists are the new fascists, controlling industry for objectives centered on political power.
August 22nd, 2007 at 4:43 pm
IntangibleBanana My reference was to our legislators and regulators dragging their heels on introducing legislation and regulation even when we have signed up to agreements to do In particular FATF and the prudential regulation regimes that only slowly are we getting to grips with. there are plenty of other examples My international colleagues view our legislators and regulators as little upstarts who have a very inflated view of their positions on the global stage. Their advice is that if NZ wants to be taken seriously then start acting serious instead of whinging on about how NZ is different and doesnt need to same rules and compliance regimes.
August 22nd, 2007 at 4:49 pm
Yeah I am pretty ignorant, got all my info from just a couple of weeks looking for where to invest some cash. Got the impression that majority shareholders elected directors responsive to them and set lines of communication so that the directors could be contacted outside of general meetings. Figured that if this was done and published as part of the material info freely available to everyone, it would become legal.
However if it is an illegal act for the shareholders of a company to establish lines of communication with the board to be used outside of AGMs I stand corrected and the government has obviously done something illegal. Plus I am slightly more comfortable investing in companies whose majority shareholder I think is crap.
August 22nd, 2007 at 5:29 pm
From my experience the Aussies in DFAT regard the fossillised socialist pollies that run NZ as 1970s museum exhibits.
This interference is an excellent argument for the rapid privatisation of Air NZ
Let’s hope the RAAF lets Kiwis on its C141s out of the next disaster area.
They understand our limitations.
August 22nd, 2007 at 6:44 pm
Selma
The Swiss people (as is their wont) voted in a referendum to NOT use their own money to bail out Swissair. And guess what – a new airline has arisen from the ashes to fill the void in the market left by the Swissair collapse. By all reports it does a good job – after all an airline is nothing more than a seat (or cargo hold) on a plane going from airport A to airport B. I wonder how the long suffering NZ tax payer would’ve voted had the Air NZ bailout been the subject of a referendum.
August 22nd, 2007 at 7:04 pm
best to be real farra, NZ do not want iraq war, we are not a war like poeple, you leader is a challenged here farra, he say nothing, we do not send our National Flag to war ever farra, i did not give you [MQ] for nothing, farra. Hide when he was tough is the only winner of a bar to MQ