Mood of the Boardroom: Business call to action (NZ Herald)

Tim McCready examines what company leaders are prioritising  in a Government response  to Covid-19

A reduction of regulatory burdens, a focus on infrastructure and a reversal of the current ban on offshore oil and gas are among the top areas the business community are calling out for Government action in response to the Covid-19 impact on the economy.

BusinessNZ put questions to its membership for the Deloitte/Chapman Tripp election survey which was in the market through June.

There were 1193 responses from a wide range of companies — spanning the construction, tourism, manufacturing, agriculture and tech sectors. The survey provides a snapshot across the full gamut of New Zealand business — from those employing less than nine staff (47 per cent of respondents) to those employing more than 100 staff (15 per cent of respondents).

The survey provides a snapshot across the full gamut of New Zealand business — from those employing less than nine staff (47 per cent of respondents) to those employing more than 100 staff (15 per cent of respondents).

Company heads were surveyed across six topics: economic environment; investment, innovation and sustainability; infrastructure; trade; skills and human capital; and employment environment.

Economic environment

Of the six topics surveyed, the economic environment was by far considered the most important (55 per cent) to achieving sustained economic growth — significantly up from 29 per cent in the 2017 election survey. The second most important topic for sustained economic growth was investment, innovation and sustainability at 21 per cent, down from 23 per cent in 2017.

When asked to choose the top three Government Covid-19 initiatives in relation to their effectiveness for the business community, the highest scoring was the wage subsidy and leave schemes (78 per cent). The subsidy scheme, which began in March, could be accessed by businesses if they could demonstrate a 30 per cent decline in revenue or projected revenue compared to the year before. There were over 780,000 applications received with some $13 billion paid out.

The next most popular initiatives were: the small business cashflow scheme (55 per cent), fast-tracking of RMA consents for shovel ready projects (41 per cent) and the redirection of Provincial Growth Fund funding (30 per cent).

Infrastructure

Infrastructure has been a key battleground in the lead-up to the election. National has announced huge transport infrastructure projects with a $31 billion spend-up including $17b for the upper north and $4b for Wellington and the formation of a National Infrastructure Bank. Labour has announced $6.8b in transport projects as part of its NZ Upgrade Programme and over $700m for shovel-ready transport projects to help with the post-Covid rebuild.

Executives were asked to rank various types of infrastructure as to which has the most potential to contribute to New Zealand’s business growth on a scale of 1-5, where 1=least potential and 5=most potential.

On average, transport infrastructure (encompassing roads, rail and ports) received the highest score with 4.19/5 in terms of potential to contribute to New Zealand’s future economic prosperity. This was also the case for the survey done in 2017. Telecommunications/broadband received a score of 4.14/5, water scored 3.84/5 and energy (encompassing electricity and gas) scored 3.69/5.

This research found that the current emphasis on infrastructure is strongly supported by business leaders, with 80 per cent agreeing that a focus on infrastructure spend is a useful mechanism to help the economy recover from economic shock. Just 10 per cent said it would not be useful, and another 10 per cent responded that they were unsure.

The BusinessNZ survey also asked respondents to consider the Government’s current infrastructure plans —  including “shovel ready” projects — and assess whether they will deliver long-lasting economic benefit to New Zealand.

Some 37 per cent said that they will, 20 per cent said they wouldn’t. But perhaps most notably, the majority —  43 per cent —  said they were unsure whether there would be a long-lasting economic benefit.

RMA reform

The Resource Management Act (RMA) looks to be gone under the next government whichever major party is in power. A government-appointed working group has delivered a report on how to simplify the 29-year-old RMA, recommending it is repealed and replaced with two separate pieces of legislation: a Natural and Built Environments Act and a Strategic Planning Act.

National Leader Judith Collins said the group came up with “almost exactly what National has been saying for three years”, although instead of National’s suggestion to have one law addressing the environment and the other urban planning and development, the panel has maintained the laws should each cover both areas.

In response to the coronavirus pandemic’s impact on the economy, Cabinet approved a law change in May to bypass part of the RMA process which will see consent decisions for eligible development and infrastructure projects temporarily fast-tracked. Instead of going to council with public input, a panel of experts chaired by an Environmental Court judge would determine whether a project can go ahead.

Some 80 per cent of company heads said that this rapid change in the RMA highlights the need for a full overhaul of the Act. Nine per cent said it doesn’t, and 11 per cent said they were unsure.

Wellbeing

Last year, the Labour-led coalition government brought the four aspects of community well-being —  cultural, social, environmental and economic —  back into the Local Government Act. This change means that councils now have a legislative responsibility to promote all four well-beings.

Business leaders were asked which of these four well-beings should receive the highest priority over the next period. The overwhelming majority (86 per cent) said economic. The next most popular was social (7 per cent), followed by environmental (6 per cent). Cultural received just 0.3 per cent.

Sustainable business practice

Colmar Brunton’s 2020 Better  Futures Report revealed that 76 per cent of New Zealanders don’t think business is doing enough to reduce its environmental impact, and 72 per cent of youth say it’s important their future employer is socially and environmentally responsible. Forty-eight per cent of Kiwis say they have deliberately switched over to a brand that is more sustainable.

BusinessNZ asked their membership whether these consumer demands for evidence of sustainable business practices have impacted how their business operates. Over half (53 per cent) of company chiefs said they haven’t impacted their operations —  but most likely will in the future. This is up from 45 per cent from the survey results from the last election year in 2017. Interestingly, only 21 per cent responded yes, which was down from 35 per cent from 2017 and 27 per cent in 2014.

Despite this reduction in sustainable practices impacting business operations, the survey showed that sustainability issues are recognised by executives as important to their business. When asked why, the most popular response —  chosen by 65 per cent of respondents —  was down to customer expectations. Sixty per cent said sustainability issues are important because of reputation, and 53 per cent said for future proofing their business. Just 12 per cent of respondents said that sustainability issues are not at all important to their business.

Executives were also asked what the Government should do to support sustainable business practice in New Zealand. Of the options provided, almost half (49 per cent) said it should look at providing incentives for cleaner production and resource efficiency. The next most popular responses were building stronger links between New Zealand regional economics, services and products (44 per cent) and providing better services for commercial and industry waste management (40 per cent). Also proving popular with over a third of support from respondents were suggestions that the Government engage with business on how to transition to a low carbon economy (36 per cent) and that it commits to purchasing products and services from businesses that integrate sustainability (35 per cent).

Oil and gas exploration

In 2018, the Coalition Government passed the Crown Minerals Amendment Bill, putting an end to new offshore oil and gas exploration. While strongly supported by environmentalists, the ban was widely criticised for being done with limited consultation and without respect for proper standards of due process.

This criticism was supported in a report done earlier this year by the Parliamentary Commissioner for the Environment Simon Upton, who wrote: “When the ban was announced, limited analysis was offered and the stakeholder consultation process was truncated.” The National Party has pledged to reverse the ban if returned to government.

When asked whether the ban should be reversed in light of current events, some 59 per cent of respondents said the ban should be reversed, while 34 per cent said it shouldn’t. Seven per cent were unsure.

Support for free trade

Business leaders were asked to rate Government policies and programmes provided to New Zealand businesses in regards to international trade on a scale of 1-5, where 1=poor and 5=excellent.

Trade agreements delivered by the Ministry of Foreign Affairs and Trade (Mfat)  received the highest score of 3.82/5, which was on par with the average score given in 2017. Other policies and programmes rated highly include non-trade barriers (via Mfat and the Ministry of Primary Industries) at 3.58/5 and information, advice and guidance (via NZ Trade and Enterprise) which scored 3.39/5.

Asked whether the Government should devote any resources toward achieving a free trade agreement with the United States given the Trump administration’s sentiments towards free trade, just under half of respondents – 49 per cent – said yes. Thirty-two percent said no, and 19 per cent were unsure.

A follow-up question asked which other countries New Zealand should pursue a free trade agreement with.

The majority said the United Kingdom (83 per cent), followed by the European Union (78 per cent) and India (58 per cent).

Unsurprisingly, in response to whether New Zealand should continue to seek international trade where possible or instead be more domestically focused, some 82 per cent of company heads were in favour. Only 16 per cent said New Zealand should be more domestically focused, and 2 per cent were unsure.

Skills and human capital

Earlier in its first parliamentary term, the Coalition Government announced reforms of the vocational education sector and the merger of 16 of the country’s institutes of technology and polytechs into one national body.

Education Minister Chris Hipkins has said the reform will lead to better outcomes for students, industry and the regions, whereas National’s then-tertiary education spokesperson, Dr Shane Reti, said the reforms will gut New Zealand’s regional education.

Executives were asked whether the Government’s reform of vocational education will result in better skills pipelines for business. They had mixed feelings — the majority, some 37 per cent, said they were unsure. A similar number, 34 per cent, said they would result in a better skills pipeline, and 29 per cent said no.

Supply of labour was another key concern highlighted by the BusinessNZ survey.

A majority, 51 per cent, said that the Government is not doing enough to support businesses with their changing staffing needs.

Just 17 per cent said enough is being done, while 32 per cent said they were unsure.

Expanding on this, the business leaders were also asked which skills and human capital issues the Government should be focusing on.

Of the options provided, the most popular said incentivising business to take on apprentices and/or provide more training (44 per cent).

The next most popular responses were: focus on science, technology, engineering and maths (STEM) at all learning levels (32 per cent), stimulating the economy to get people into jobs quicker (31 per cent) and taking a more company and industry-oriented approach towards developing solutions to skill gaps and labour market constraints (29 per cent). Lowest scoring options included focusing on the aging workforce  (10 per cent) and increasing support for speakers of English as a second language (2 per cent).

Backing the 90-day trial

The 90-day trial period was introduced under the National government, which allowed employers to dismiss new employees within the first three months if they didn’t work out.

A Treasury study published in 2016 found no evidence that the trial periods had an impact on the number of people hired and the trials were subsequently watered down by the current government in 2018, so that only those firms with fewer than 20 employees could hire new workers on trial periods.

In the midst of the Covid-crisis, the National Party called on the Government to “urgently restore” the 90-day trial period for new employees, saying that it would help those who have lost their jobs during the pandemic get back into work.

The majority of those surveyed agree, with 73 per cent saying reintroducing the trial period would be of benefit to their business operations.

Some 20 per cent said no, while the remaining 7 per cent were unsure.

The survey also asked business leaders to indicate from a range of employment issues which are currently of greatest importance to them. The top-rated issue is access to skills and talent, with 31 per cent of respondents choosing this option. The next most popular responses were: managing employee costs/cost cutting (18 per cent) and employment relations legislation such as minimum wages (13 per cent).

The lowest scoring issues at the moment for respondents are emerging technology such as increased artificial intelligence and automation (7 per cent), the Holidays Act (3 per cent) and pay equity claims from employees (1 per cent).

Emerging technology

There was scepticism from respondents on whether there will be significant impacts on the size and composition of their workforce as a result of emerging technology.

Just over half, 51 per cent, said there will not be a significant impact from the likes of artificial intelligence and robotics — which is a near identical response to the same question in 2017.

Some 40 per cent said there would be, and 9 per cent were unsure.

Mood of the Boardroom: Greens’ wealth tax ‘too difficult to implement’ (NZ Herald)

An overwhelming number of CEOs — 76 per cent — in the Herald election survey — do not support a wealth tax.

Green co-leader James Shaw has not made a wealth tax a “bottom line” for post-election negotiations, but he has called it a “top priority”.

The Greens’ proposed tax would see those with net assets over $1 million face a 1 per cent annual wealth tax. This would be used to fund a sweeping new welfare policy that would guarantee a weekly income of at least $325. Shaw has said the Greens are prepared to forgo a coalition or confidence and supply arrangement and sit on the cross-benches if post-election talks do not go their way. However Labour Finance Minister Grant Robertson has categorically ruled out  adoption of the Greens’ tax policy.

Nearly a quarter of survey respondents said they would support a wealth tax — with eight per cent saying Yes to the Green policy as proposed; 3 per cent saying Yes but with a five-year sunset clause (as part of the Covid-19 response), and 13 per cent saying Yes, but only at materially higher levels than  proposed. They say the wealth tax seems to be poorly thought through and would be difficult to measure and implement.

“If it is not linked to income or a transaction, where will the money come from to pay the tax?” asks Beca CEO Greg Lowe. “This is an unworkable burden on anybody who owns an asset, including  family homes.”

A similar view from an agricultural boss: “It is a tax on the elderly who have worked to build an asset base but who in retirement may have little cash flow — will they sell their assets to pay the tax?”

Others say it will drive people away from New Zealand and lead to behaviour that will reduce an individual’s tax burden. “It will lead to a flight of capital needed to promote economic growth and prosperity and at the same time reduce the incentives to work,” says one CEO. An infrastructure executive: “All it will do is drive talent and to Australia and discourage wealth creation.”

A food distributor reckons a wealth tax is too difficult to measure and implement. “In reality, wealthier individuals would find ways of protecting their wealth from such taxes, leaving the bulk of the tax burden on middle class taxpayers.”

Mood of the boardroom: The Green Party – A tale of two leaders (NZ Herald)

CEOs struggle with the Green Party’s co-leader model and the differing styles of their two leaders James Shaw and Marama Davidson.

Shaw’s centrist, corporate style is representative of the modern climate activist and is well received in the business community. He was rated at 3.21/5 for his individual performance — although his recent missteps with funding the Green School did not go unnoticed.

He was forced to apologise for an “error of judgment” over funding for the privately-run environmentally-focused school in Taranaki where he signed off an $11.7m grant — despite the Green party’s exclusion on funding for private schools.

Says an agri sector boss: “James Shaw is impressive, with the exception of the Green School decision.” A real estate CEO counters, Shaw “has been unfairly thrown under a bus on the recent Green School row. Madness. How much are we talking about $70m for race tracks?”

In stark contrast to Shaw, Davidson received a rating from business leaders of just 1.85/5.

“James Shaw has good leadership on climate change, little else has resonated especially from Marama Davidson,” says Federated Farmers CEO Terry Copeland.

Davidson entered Parliament in 2015 after a 10-year career at the Human Rights Commission that brought life to her activist and social justice foundations. She is reminiscent of the Green Party of old — not the slicker political machine they have become.

She became co-leader following the controversial departure of Metiria Turei just prior to the 2017 election. Her selection was strongly supported by more than 75 per cent of the Green Party membership, which demonstrated a strong desire to reinforce the party’s social priorities and have an opposing force to Shaw’s co-leadership.

Clearly the two-pronged approach  comprising social and environmental priorities, does not resonate well with New Zealand’s top business leaders. But this is a deliberate strategy by the political leadership to play to their strengths. Davidson has said the leadership split means she is able to focus on the party and ensure the full delivery of their confidence and supply agreement, while maintaining unity across party membership.

“With one leader as a Minister and one not we are able to avoid the pitfalls other parties entering Government have experienced who have seen their support fall,” she said.

A banking chair believes “Shaw has had a positive impact on how many NZ voters see the Green Party; Davidson has had a negative effect.

Green issues

Deloitte’s CEO Thomas Pippos says although he can’t see it happening, “I would expect the Green Party would be more successful if it focused primarily on Green issues for which there is a broad constituency.” An independent chair was more on the nose, suggesting: “They are not Green. They are just diehard socialists.”

Another suggests “James Shaw again demonstrates why he should quit the Greens and form a (real) Green party.”

But a real estate boss reckons the Greens are doing well to tiptoe a difficult line between Green Party members and Green Party voters. “I’m not a Green Party supporter or voter, but believe that we need their voice.”

In 2016, when John Key was Prime Minister, the Mood of the Boardroom CEOs suggested an alliance headed by Jacinda Ardern and Shaw could be a “dream team”.

Shaw as a possible  Deputy Prime Minister is a real possibility if the Greens form a coalition government with Labour following the election. His elevation would be applauded by many business leaders. But the greater visibility would undoubtedly bring its own challenges — for both the Greens and the electorate.

Leadership

Business leaders are divided over whether Shaw and Davidson have been effective leaders of the party over the past three years. Some 38 per cent of respondents to the  Mood of the Boardroom election survey said Yes; 40 per cent said No; 22 per cent were unsure.

The Green Party says in its three years as the Coalition’s support partner it has led the way in tackling climate change, reducing inequality and protecting nature.

One of its most significant policy wins was the passing of the Climate Change Response (Zero Carbon) Amendment Bill. The Greens say the landmark legislation “provides a framework to support New Zealanders to prepare for, and adapt to, the effects of climate change… and is a key part of the Government’s plan to tackle the long-term challenge of climate change.”

The party was also responsible for a $1.1 billion environmental investment in this year’s Budget, which it says will create thousands of green jobs and help jump start a sustainable recovery from the Covid-19 crisis.

Its influence in government ended new offshore oil and gas exploration and saw the banning of single-use plastic bags.

But despite these achievements, comments from New Zealand’s top business executives demonstrate the challenge minor parties have to retain distinct identities and receive credit for their successes while in coalition government.

The chief executive of a food distributor says the Green leadership “don’t appear to have been able to leverage their position in the coalition to advance too many of their causes”.

“They have not found the traction they should have,” says Mainfreight CEO Don Braid.

A Crown entity boss says, “James Shaw has been highly impressive and is right to state that his party — alongside Labour — has done more to address climate change this term than any other government in passing the Zero Carbon Act.”

The CEO of a professional services firm agrees saying the Greens “have survived the three-way coalition and got the Zero Carbon Act passed. Well-placed for just a Labour-Greens coalition at the election.”

Mood of the Boardroom: CEOs grade the National leaders (NZ Herald)

Collins tops the poll, Muller’s appointment  is seen as a mistake, but there is praise  for Bridges’ performance

National enjoyed stable leadership, with John Key serving just over 10 years, followed by Bill English, serving one year 77 days until he stepped down just months after the 2017 election.

Tauranga MP Simon Bridges was chosen to replace English as National leader in February 2018. He battled poor individual ratings but maintained popularity for National at around 40 per cent in political polls until the Covid-19 pandemic struck.

In the Herald’s 2020 Mood of the Boardroom survey, CEOs gave Bridges’ leadership of two years 85 days a rating of 2.40/5.

“Bridges was highly ineffectual as a leader and did not engender confidence,” says one company director.

A government relations firm boss said that despite Bridges being a good person, he had little personal connection with voters — “but he got National into a superb position before Covid-19”.

Bridges chaired the cross-party epidemic response committee during the alert level four lock down, receiving praise for his handling of the daily online forums which covered issues from health, media, tourism and the economy.

But he was also heavily criticised for his decision to commute between Wellington and his home in Tauranga during the lockdown to conduct the committee via Zoom. Bridges said then: “I don’t take these things lightly, but I am the leader of the Opposition, I’ve got constitutional duties, I’m running a committee in extreme circumstances where there is no Parliament.

“I have to do that in the best way possible and it seems to me that does mean doing it in Parliament where I have the resources, where I can do it in a professional way, and I’m available to media.”

A Facebook post from Bridges in April also received wide condemnation from the public.“The decision for New Zealand to stay locked down in Level 4 shows the Government hasn’t done the groundwork required to have us ready,” he wrote.

“New Zealand is being held back because the Government has not used this time to ensure best practice of testing and tracing and the availability of PPE hasn’t been at the standard it should have been.”

Of 29,000 Facebook responses the majority were negative. In retrospect, Bridges’ post had merit, but his delivery showed he seriously misread the mood of the nation at that point.

Said a transport CEO: “Bridges was probably an effective leader of the Opposition, but not well liked enough to get elected Prime Minister”.

By May a Newshub-Reid Research Poll showed National’s support had fallen to 30.6 per cent with Labour drawing ahead on 56.5 per cent. An emergency caucus meeting saw the swift removal of Bridges and deputy Paula Bennett as the little known Bay of Plenty MP Todd Muller and former Auckland Central MP Nikki Kaye were elected as leader and deputy respectively.

Muller has been a staffer in former Prime Minister Jim Bolger’s office. He later worked for Zespri and Fonterra. In a letter to MPs ahead of the caucus vote, Muller said it was “essential” that National win  the 2020 election.

“I share the view of a majority of colleagues that this is not possible under the current leadership,” he wrote. “I believe I am best placed to earn the trust of New Zealanders by September 19.”

But Muller’s stint in the top job was short-lived — at 53 days the shortest in modern National Party history. “Unfortunately — a number of misfires with Todd materially challenged through time in the role,” says Deloitte CEO Thomas Pippos.

These included criticism of a lack of diversity on his front bench, distractions over his Donald Trump ‘Make America Great Again’ cap, and the leak of confidential information of Covid-19 patients to media by former National Party president Michelle Boag and National MP Hamish Walker.

A company director said it is difficult to assess Muller because “he was obviously in the middle of a toxic and tumultuous period for the party.” Another wrote he “was pushed by inexperienced colleagues and self-serving advisers into a job he wasn’t up to and that mistake severely damaged National.”

At the time of his surprise resignation he said that the role had taken a heavy toll on him personally and “has become untenable from a health perspective”.

“It has become clear to me that I am not the best person to be leader of the Opposition and leader of the New Zealand National Party at this critical time for New Zealand.”

CEOs rated his performance at 1.77/5.

His successor, Judith Collins, placed both Muller and Bridges on her frontbench as spokespeople for trade and foreign affairs, respectively.

The head of a fund manager probably best sums up sentiment among respondents: “No point going over old ground. That’s in the past now.”

With Judith Collins receiving a significantly higher rating compared to both her predecessors for the same question of 3.52/5 and just 19 days until the election, perhaps that is right.

Mood of the Boardroom: Covid-19 has cast a pall over CEO confidence

Coronavirus-related issues dominate  the domestic concerns in this year’s survey, writes Tim McCready

Confidence has plunged in the 2020 Mood of the Boardroom survey to the lowest levels seen since the  Herald began surveying the nation’s leading chief executives.

CEOs are particularly concerned about the maintenance of a strong border against Covid-19, which they rated at 8.52/10 on a scale where 1=no concern and 10=extremely concerned. A suite of Covid-related issues dominates the domestic concerns in front of CEOs.

These have pushed out traditional concerns like skills and labour shortages into a secondary position.

Cumulatively, the 165 respondents to the Herald’s CEOs Election survey rated their optimism in the New Zealand economy at 1.36/5. When it comes to the global economy, where many nations are being ravaged by Covid-19, their combined rating was 1.16/5. Typically for this survey, they rated their optimism in the general business situation in their own industries at a higher level — 1.90/5.

“2021 will be a challenging year for many,” says KPMG executive chairman Ross Buckley. “Those that have solid foundations, in the right sectors, using technology and that are agile will do well.”

Those in heavily impacted industries are realistic about the future. “Our business is heavily dependent on tourism, so the impact of Covid will be significant,” says one CEO.

However, there are pockets of optimism from those who have seen an increase in business resulting from the crisis, such as shipping and logistics firms — they point out reduced commercial aviation “means more demand for our services”.

Another beneficiary of the pandemic has been grocery retailers. Foodstuffs North Island CEO Chris Quin says: “We are privileged to be in an in-demand category, but New Zealand can’t replace its second biggest industry overnight — and the global economy cannot recover quickly from the discretionary spend being removed.”

One respondent says although their industry is having to make huge changes due to Covid, it is providing the impetus to finally digitise and modernise — and the New Zealand economy will be better off in the long term because of it. “I’m optimistic we can actually come out of this with a fresh approach and a more knowledge-based economy if we play this right.”

But many recognise that despite New Zealand being a good position relative to many other parts of the world, the unpredictability of the coronavirus pandemic and long-term uncertainty means it will be a while until we can return to more optimistic levels.

“I suspect we are well shy of fully understanding the long-term economic impact of Covid and various political responses globally. We are quite exposed to political shifts in terms of trading and supply chain,” says a top recruiter.

Domestic concerns

The top six concerns are all Covid-related, although as Dame Alison Paterson points out: “In this uncertain environment, it is hard to assess. What is normal? In Covid alert levels three and four Auckland’s congestion disappears.”

“I am deeply concerned over the hopeless border, testing and isolation management we currently see that causes real concerns about the impact this may have on essential service workers and the ability to deliver these services,” says a CEO in the energy sector.

“Before focusing on being kind, let’s be competent.”

There is also heightened concern over the level and quality of Government spending (8.40/5). There is also significant concern over the impact and direction of current or proposed Government policies, which received a score of 7.96/10.

Deloitte CEO Thomas Pippos says “people are looking to the Government for a clearly articulated strategy that the population can get behind that will include changes to the existing policy settings.”

Beca CEO Greg Lowe says there needs to be a more co-ordinated effort to develop a plan that ensures we have a strong economy and achieve economic growth over the next three years “to generate government revenues that are sufficient to start repaying the debt incurred in this crisis”.

One of those looking for a clear strategy is an IT boss: “There do not appear to be any policies from the current Government for moving forward — there is no current plan that would provide any business person with any confidence whatsoever. Sprinkling money like confetti is a short-term unsustainable approach.”

But others are more upbeat, and say the Government and its agencies have been swift to respond in a way that has boosted confidence — particularly when compared to the response of other countries.

“The Government response has been incredibly thorough,” says a software CEO. “As a business owner, I feel very supported and that they’re moving mountains to provide support and keep us moving.”

International concerns

Covid also features among the top rated international concerns — with the fear of further waves of the virus receiving a score of 8.22/10 and a slowdown in world trade growth due to fallout from the pandemic scoring 7.64/10.

“The challenges of the international environment are daunting and our ability to remain agile and leverage of New Zealand’s well-respected trading legacy cannot be underestimated in our response,” says Downer CEO Steve Killeen.

Powered by Flossie CEO Jenene Crossan proposes New Zealand leverage the Prime Minister’s celebrity on the world stage as part of our response.

“Jacinda Ardern is very highly respected due to her leadership style. Let’s use this to increase our exports — especially in the tech industry.”

Increased protectionism and trade wars also rates high in terms of concern at 7.71/10, as does the lack of international leadership at 7.49/10.

The a2 Milk Company CEO Pip Greenwood notes: “The escalating tensions between the US and China and Australia are of concern for us as a small export reliant nation.”

“Volatility in world trade markets — whether they be politically motivated or as a result of health responses — will inevitably impact New Zealand as an export trading nation,” says one CEO. “New Zealand must respond in an agile way to ensure our own national success.”

“The international political situation is dire!,” deduces NZ International Business Forum executive director Stephen Jacobi.

Mood of the boardroom: Seymour a single-handed success (NZ Herald)

CEOs say Act leader David Seymour has been a standout in Parliament and a de facto leader of the opposition, writes Tim McCready

David Seymour has come a long way  since  Dancing With the Stars.

When asked whether Act leader David Seymour has been an effective leader of Act over the past three years, 91 per cent responded, Yes. Just 3 per cent said No, with 6 per cent unsure.

“No matter what your political persuasion it would be hard to go past Seymour as the most effective minor party leader,” says a transport boss.

A telecommunications CEO says: “I have never rated him, but he has come from nowhere to be the most impressive MP — after the Prime Minister.”

“The surprise this year has been the development of David Seymour who can look back on this last term with a degree of satisfaction around achieving some tangible outcomes from an unenviable position in the House,” says Deloitte CEO Thomas Pippos.

CEOs were asked to rate Seymour’s political performance over the past three years on a scale where 1= not impressive and 5= very impressive. He received a score of 4.03/5 — the highest of all minority political party leaders.

“David Seymour has been most impressive over the last year,” reckons Precinct Properties chair Craig Stobo.

“David Seymour continues to impress on a regular basis. He is not afraid to take a stand on controversial matters,” says an IT service provider. Though another says they disapprove of his “unfortunate association with NZ’s version of the NRA”.

A strength  that came through repeatedly from respondents in the 2020 Mood of the Boardroom survey was his ability to communicate effectively. “He can deliver a crisp soundbite with authority (and sometimes humour) reflecting the views of his voter base,” says the head of a Crown entity.

His  abilities were demonstrated during the lockdown. He impressed during the epidemic response committee hearings, praising   Prime Minister Jacinda Ardern for the initial response but also forensically examining aspects of the  response — including the management of data, issues with PPE, testing rates and contact tracing capabilities. Though  he was supportive of the lockdown, he opposed certain aspects — including the shutdown of Parliament —  and called for the allowance of safe activities. “David was magnificent on the epidemic response committee during lockdown,” says professional director and former minister of finance Ruth Richardson.

“He represents the finest political leadership — lucky us that a person of his calibre, especially as a one-man band, is so dedicated to his mission to make New Zealand a better country.”

De facto leader of the Opposition

The tone he struck during lockdown has been praised — in contrast to that of then-Opposition leader Simon Bridges — and led to some executives suggesting Seymour has become the de facto leader of the Opposition.

“David Seymour has really developed and thrived in this environment,” says a top winemaker. “He is concise, clear and asks questions that the Nats should.”

A real estate CEO reckons he “is a one-man leader of the Opposition.”

“He has shown up the Opposition Party,” says a leader in the healthcare industry.

Adds another: “He is growing in his effectiveness to present alternative arguments. We need that for good government.”

“David Seymour is beginning to act like a real alternative with  sound and pragmatic policy and comment,” says Mainfreight CEO Don Braid.

A professional director says “Seymour comes across as someone who does the hard work, thinks about issues and is willing to challenge. We need Opposition parties to do exactly that. ”

A bolstered party

The recent 1 NEWS Colmar Brunton poll puts Act at 7 per cent (compared to the 2017 election result of 0.5 per cent), and indicates Seymour will return to Parliament with  an additional eight MPs.

“He is measured, constructive and principled and the voting public notice and appreciate — look for a 10 per cent vote for Act,” predicts  Richardson.

A fund manager says: “Seymour has hung in there but will do well this election only because of the protest votes against National where centre/right voters have little else to go.”

One respondent suggests “Life will be different for Seymour next term if he has a caucus to lead and unite, and he has some interesting characters in there.  He will need to work hard to ensure he doesn’t have the same experience as Peter Dunne.”

End of Life Choice

Seymour’s major success has been the introduction of the End of Life Choice Bill. The bill — which will give people with a terminal illness the option of requesting assisted dying — passed its final reading in Parliament last year, four years after Seymour put it into the ballot box. The binding referendum will take place this month in conjunction with the general election.

CEOs credit the ability of Seymour to get the bill through the hurdles of Parliament and say it speaks to his hard work, tenacity, and willingness to tackle the important issues as he seems them — and not “yoyo for political gain”.

“It has been an impressive outcome for the euthanasia bill,” says The Icehouse CEO Gavin Lennox.

“He has been willing to take a position when convinced that it was the correct position to take,” says a professional director. “This allowed him to successfully get the End of Life Choice Bill through Parliament — despite being only a single MP.”

Mood of the Boardroom: Top-rankers suffer from a spell of invisibility

CEOs say the majority of National’s top 10 need to raise their profile.

“I don’t know them,” says the CEO of an IT company. “Hardly heard of most of these people,” says another. An agricultural boss reckons “many of them are not visible.” From a winemaker: “It is not appropriate to comment — I am unfamiliar with their efforts.”

For this reason,  a high proportion of respondents gave “Unsure” votes to National’s highest ranked MPs.

For example, MPs including Shane Reti, Chris Bishop, Louise Upston and Scott Simpson all received “Unsure” responses from over 20 per cent of respondents.

Some of this will likely be due to the fact that the leader inevitably overshadows the rest of the caucus — Judith Collins received the top score with an average rating of 3.55/5.

“She is more decisive and articulate than her two immediate predecessors,” says a top lawyer.

“Her leadership qualities were immediately obvious from her first press conference as leader, and from the way in which she ranked her front bench, incorporating both Simon Bridges and Todd Muller,” says a director.

Recently appointed health spokesperson Shane Reti has clearly benefited from the ongoing Covid-19 health and border response coverage. Those who know who he is have given him the second highest score of 3.29/5 — almost eclipsing Collins.

Meanwhile National’s deputy leader Gerry Brownlee received a score of 2.79/5 — taking a hit due to the comments he made around the Government’s Covid-19 response.

In a press conference last month alongside Collins, Brownlee outlined several events and said they were an “interesting series of facts”. They included the Government’s plea to the public to prepare for a possible outbreak, Prime Minister Jacinda Ardern’s visit to a mask factory, and Director General of Health Ashley Bloomfield’s public Covid-19 test just hours before announcing the community outbreak in Auckland.

“Gerry Brownlee didn’t do himself any favours by coming across as a conspiracy theorist,” says the head of a commercial law firm. “There is enough of that sort of nonsense around and an apparent endorsement from the deputy leader of the opposition is unhelpful.”

Heading into the 2017 election, Bill English’s top 10 combined received an average rating of 3.34/5 in the Mood of the Boardroom survey. This year, the combined average is 2.99/5.

Some of National’s most high-profile talent have departed politics this term — including Anne Tolley, Paula Bennett, Nikki Kaye and Amy Adams — and comments from some respondents suggest that this may have contributed to the lower score for the top 10 this time around. “This weakened team hardly fills me with confidence,” says a fund manager. “I see no depth in this party and no ability to sing from the same song sheet. I have no idea what they stand for, other than negativity and dirty politics,” says an IT CEO.

“There are pockets of ability and lots of some who haven’t quite worked out where they are going at the moment,” says a lobbyist. “They are a party in transition who — like Labour numerous times in the Key era — panicked over leadership when confronted with a PM with charisma and talent.”

Suggests one professional director: “We need to see the energetic young Nats coming through — Nicola Willis, etc.”

Mood of the Boardroom: Hi-tech contact-tracing in favour (NZ Herald)

More can be done to minimise the economic impact of Covid, writes Tim McCready

Some 91 per cent of executives responding to the Herald’s CEOs survey want greater emphasis on intensive contact tracing using best-in-class technological capabilities.

The CEOs also want New Zealand to establish secure airbridges with other nations such as China, Taiwan and Australia — so long as we their response is also under control.

“Air bridges should be considered only when Covid-19 is truly under control and contact tracing technology is truly best in class and traces beyond the border,” says a dairy chief executive.

An experienced chairperson reckons that many — particularly older people — will want to resume international travel as soon as possible. “It should be possible on a user pays basis to allow technology-enabled devices (such as ankle bracelets) to allow returning residents and citizens to quarantine in their own homes on return from overseas.”

Public-private partnerships

There is high support — 78 per cent — for public-private partnerships (PPP) for quarantine facilities where essential workers can be quarantined at their company’s cost. PPP isolation facilities for international education students were backed by 75 per cent of respondents; a much higher level of support than PPP isolation facilities for international tourists — only 48 per cent of respondents said that should be a focus.

“The tourist isolation facility idea is similarly impracticable because tourists are unlikely to want to come to NZ and stay in such a facility for 14 days at their expense (not much of a holiday),” says a legal firm boss. “Isolation facilities for students sound good in theory but the numbers involved would make this impracticable.”

Some questioned NZ’s reliance on export education as an economic driver.

“How much was international education just a feeder to the incredibly high immigration levels over the past ten years?,” asks a property boss.

“I really think we have to critically examine this sector’s contribution — painful as that might be.”

A lobbyist believes PPPs would alleviate some of the constraints around capacity.

“Our Ministry of Health isn’t up to handling this pandemic, they have dropped the ball so many times and are very economical with the truth. A future inquiry will not be pretty for some who we rate very highly now.”

Beca Group CEO Greg Lowe emphasised the pandemic is not a short-term problem, calling for a “smart” approach to a safe border. “The Prime Minister called for ‘the smartest border in the world’ early in the crisis but we are not seeing much progress towards this,” he says.

“We have three problems currently: getting an effective system of border control robustly in place, getting a contact tracing system in place that uses technology not people to capture contact data, and developing a plan that increases safe border processing capacity.”

“Maybe we can build world-class Covid management businesses out of this,” suggests Precinct Properties chair Craig Stobo.

Others differ.

“Government-run facilities have had their challenges, and they’re just the issues you get when you need tens of thousands of people to follow processes where, if it goes wrong, people die,” says a real estate boss. “Add the inherent risk of lots of people and processes to a profit motive and I just can’t see the Melbourne situation not happening again.”

Opening the door to new industries

The Covid-19 crisis has had a severe impact on two of New Zealand’s leading service export industries: international tourism and education.

Professional director Pip Greenwood says “now is the time to leverage NZ’s attractiveness as a place to live and work to attract investment.”

CEOs were asked what alternate areas New Zealand should look to increase investment in.

Agritech is the most promising area say NZ’s top executives. A fund manager says Covid could allow New Zealand to “double down” on its premium food producing status. “Move up the quality/pricing curve to drive greater yields from our premium products and sell direct to consumers via digital gateways.

Technologically-led businesses were also supported.

Spark CEO Jolie Hodson says rather than making big bets behind a small few we should be investing in building the capability, productivity and effectiveness of all businesses. “Particularly small and medium-sized businesses who would benefit significantly from going digital,” she says.

Decarbonisation of the economy and the development of a green hydrogen industry received 3.62/5 and 3.54/5, respectively. New forms of public transport such as electric planes, received a score of 3.07/5.

The latter was the top pick for Green co-leader James Shaw at the recent BusinessNZ election conference.

He said there were NZ companies doing this, including those involved with the America’s Cup.

“We do have a niche industry that is starting to emerge here, which I would like to see grow.”

“Our biggest opportunity for decarbonisation is electric vehicles. We have enough consented and existing generation to power the nation’s vehicular fleet at circa 30c per litre,” says one professional director.

“What has happened to Helen Clark’s ‘knowledge economy’?” asks Beca Group’s CEO Greg Lowe.

“Development of alternative transport solutions, the potential of alternative fuels like hydrogen to provide a new export market, export of digital solutions and services — we should be working to build a stronger national plan to advance all of them.”

But respondents caution New Zealand not be too quick to write off our traditional export earners.

One said that realism is important in this situation, noting that tourism and export education will return.

“There is no real strategy to transform the economy either from a production perspective or around decarbonisation — it’s all hopes and dreams stuff currently.”

Capital Markets: Lessons and trends from the pandemic (NZ Herald)

We’ll be feeling the impact of Covid-19 for  a long time to come, in many different ways

Covid-19 has shaken capital markets globally, and the long-term impact will not be known for a long time.

Disruptive events tend to accelerate trends that are already in place, and Covid-19 will bring wide-ranging implications and deliver lessons into the future for organisations and individuals within the capital markets sector. Here’s some to chew on:

Digitisation, automation and cybersecurity

The most visible trend accelerated by Covid-19 is the leap forward in the digitisation of the economy. Westpac chief economist Dominick Stephens says there will be no going back: “that may be the last straw for some firms and a huge opportunity for others, but digitisation is a positive for the economy overall.”

Digitisation has long been mooted as a mega trend that will disrupt the capital markets sector, but the pandemic has necessitated a swift response. The past several months have exposed the requirement for firms to make a large number of decisions with increased speed and agility. Many expect the disruption to force firms in the capital markets sector to look at new operating models that are more automated and increasingly data-driven to address revenue challenges and drive down costs. This will include leveraging artificial intelligence, the cloud, machine learning and analytics to drive efficiency, improve productivity and improve competitiveness.

Increased competition from fintech firms has been eating away the market share from traditional players. Prior to Covid-19, industry giants in the capital markets were making moves to acquire and collaborate with fintech start-ups. This is expected to continue at pace, as they acknowledge openly the need for innovation to bolster their capability and agility.

However, the rapid digital transformation and changes in the way business is conducted has also brought with it a significant increase in fraudulent activity which will ensure cybersecurity remains an important consideration for capital markets. Cybersecurity firm McAfee’s quarterly report says there has been a surge of cybercrime exploiting the pandemic through Covid-19 themed malicious apps, phishing campaigns and malware. The US Federal Bureau of Investigation said it had received as many cyber-attack reports by the second week of June as it had in all of 2019.

Impacts on people, ways of working and the gender pay gap

The pandemic changed the way employees around the world worked and engaged with their workplaces and proved that remote and flexible working is possible — even in capital markets where some firms have been reluctant to embrace the trend. While most workers in New Zealand have now returned to their workplaces, many agree there were values that became more pronounced during lockdown that we should try to hold on to. Organisations are now considering how they can be more flexible, agile and have a heightened awareness of employee wellbeing. At the same time, they want to ensure that the quality of work and productivity remains high.

A recent EY article questions whether this flexibility, reprioritisation of goals and consideration of what is important could help to close the gender pay gap. Firms in the capital markets are continuing to face requirements to become more diverse. In Europe, France is demanding a 40 per cent quota of women on boards. The UK has had more than 350 financial services firms sign up to the UK Government’s Women in Finance charter, where they set targets for gender diversity. But despite this, the World Economic Forum’s Global Gender Gap Report 2020 revealed that gender parity will not be attained for 100 years.

EY notes the “wholesale levelling of the playing field” has the potential to challenge HR, talent and recruitment and lower long-standing barriers including those for parents with children or those with other caring responsibilities.

Cashless society edges ever closer

The arrival of a cashless society has been long-anticipated, but the events of this year have no doubt accelerated its arrival. Kiwis have embraced mobility and connectivity, and Covid-19 has seen us become more comfortable with e-commerce, Auckland Transport go cashless, and many stores encouraging cashless payment for hygiene reasons — with the contactless eftpos limit temporarily raised from $80 to $200.

The Bank for International Settlements released a bulletin in April, noting that Covid-19 has fanned public health concerns around the use of cash. It said that looking ahead, developments could speed up the adoption of digital payments around the world, including central bank digital currencies.

In China, digital payment platforms are already widespread, including Alibaba’s Alipay and Tencent’s WeChat Pay — so much so that in many stores cash is not accepted. Taking this a step further, China is launching a pilot programme of its digital yuan in four major cities. The currency is backed by China’s central bank, the People’s Bank of China, and is pegged to the national currency. Commentators say the objective of the digital yuan is to increase its circulation and become a global currency like the US dollar, and that the timing of the launch — when the rest of the world is dealing with the global pandemic — provides China with an unusual opportunity to beat private competitors such as Facebook’s Libra currency.

Surge in sustainable investing

During lockdown, many appreciated the return of birdsong to inner-city neighbourhoods and the quiet that came from the severely reduced traffic. Satellites mapping air pollution revealed a significant drop in nitrogen dioxide concentrations across Europe and China, coinciding with the strict quarantine measures.

Analysts are predicting Covid-19 to be a major turning point for ESG investing, or strategies that consider environmental, social and governance performance as increasingly important alongside financial metrics. The pandemic has highlighted how connected humans and society are to nature, plainly demonstrating how a fracture in one part of the ecosystem can compromise the entire system.

A survey of 50 global institutions by J.P. Morgan, representing US$12.9 trillion in assets under management, asked how they expect Covid-19 to impact the future of ESG investing. Some 71 per cent of respondents say it was “rather likely”,   “likely”, or “very likely” that a low probability — high impact risk like Covid-19 would increase awareness and actions globally to tackle high impact — high probability risks such as those related to climate change and biodiversity losses.