Corporate healer says iwi need to pool resources
John Spencer, the man brought in nine years ago to turn around Tainui's fortunes, says to realise their economic potential tribes have to merge their commercial arms.
In an interview with NBR ONLINE in his final week as Tainui Group Holdings chairman, Mr Spencer says Tainui has not done enough to hand down its profits to its most needy members and spells out his commercial blueprint for tribes receiving Treaty settlements.
In 2003, when Mr Spencer was brought in as Tainui's corporate healer, the tribe had written off $40 million of $170 million settlement from 1995, including a disastrous $6.3 million spent on the Warriors rugby league team.
As detailed in NBR's award-winning coverage in 1998, the culture was very much fast cars, fat pay packets, nepotism and questionable investments that failed to benefit the tribe's poorest members.
This week, in Mr Spencer's final days at TGH's helm, he oversaw a record $11 million dividend on TGH's $700 million of assets.
The former $1 million-a-year chief executive of the New Zealand Dairy Group says for iwi to realise their full potential they needed to join, commercially. That will save costs, spread risk and give iwi the ability to take on larger projects.
"You could almost have a super fund - all the assets put together, invested," he told NBR ONLINE.
"You imagine, if you put Ngai Tahu and Tainui alone together you're easily over $1.5 billion, getting close to $2 billion. That's a pretty big organisation."
While there's talk amongst the tribes about pooling assets, Mr Spencer admits it's politically difficult and might only happen gradually.
But its "absolutely" something the tribes should do, he says.
Mr Spencer revealed his key lessons for iwi commercial success:
# Separate the commercial arm from the social arm
# Have a board charter, setting out rules, expectation of the commercial company and its powers, details of who the directors are, how they're appointed and their terms, structures of committee
# Create a shared statement of corporate intent with the tribe
# The board must have a mix of independent and tribal interests
# Iwi should use commercial boards to develop future leaders
# Seek investment partners
Mr Spencer is adamant success is measured in people and he says Tainui's poorest members are not getting the help they should. The company's dividends should be better spread into the "right areas", he says, such as health and education.
"I think Ngai Tahu does a good job on that but Tainui's got a long way to go, in my honest opinion. They know that and they're starting."
So Tainui's job isn't finished?
"The commercial side's fine," Mr Spencer says. "I've got no doubt that's just going to go from strength to strength, and that's not because of me, it's because of the management that's there as well, and the directors.
"But I still think now there needs to be far more stability on the tribal side and therefore they can get on and do their job, which, as I say, is to benefit the people."
'It was just out of control'
In a 2003 interview with NBR, Mr Spencer rejected a suggestion he was a new broom about to sweep clean. But today he paints a fuller picture of the Tainui chaos he encountered when he arrived.
"It was very poor. For example, we didn't even know what assets we owned. There were no proper structures. There were numerous bank accounts, numerous directors and a whole lot of subsidiaries and it was just out of control. There was no control.
"It was sad, it had been allowed to just deteriorate - it just hadn't been established properly. So, it virtually took a year to understand what we were coming to grips with, get land transferred into the right companies, get titles transferred, clean things up and work out where we were going to go."
He was not mistrusted as a corporate white face, he says, because the tribe, and particularly the Queen, Dame Te Atairangikaahu, realised the mess it was in.
"They needed help and let's be honest, I wasn't the first person they had approached."
TGH was formed before he arrived. It was a matter of how it was going to be run.
Today, the tribe's bulging property portfolio includes the Novotel Auckland Airport, The Base shopping centre - on the site of the former Te Rapa airforce base - Centreplace Mall and University of Waikato. It also runs a profitable fishing venture, Waikato-Tainui Fisheries and is now seeking commercial partners to develop a $3 billion inland port at Ruakura.
A tribe's commercial arm must be, at all times, directed and allowed to act commercially, Mr Spencer says. But the commercial and social arms must work together, because "one supports the other".
It's a fine line to tread. Too fine at times. Mr Spencer says having a written board charter ensured the company stayed on the right path, "particularly when politics get in the way".
He initially found himself at odds with the tribe over land sales - necessary because there was no money in the bank and banks, rightly, wouldn't lend to them. That dispute was resolved by an agreement TGH's vision was to grow the overall land holdings - allowing unproductive, non-sacred land to be flicked off and more productive land to be bought.
"That's what a commercial company's all about - working the assets."
Despite a degree of separation, the board was not immune to pressure from the tribe.
"At different times, there was a lot of pressure. Not so much to interfere, but to steer it in different directions. People have pet hobbies and I think that's always one of the biggest issues - why can't we use the money to do this that and the other thing - which commercially didn't make sense.
However, it was hard to argue with the company's performance. The management and board were also united, behind written investment policies and the all-important statement of corporate intent.
This week, Ngati Raukawa announced it is sending the board of its commercial arm to "directors’ school".
Mr Spencer, who starts as a Ngati Raukawa director on August 1, says they've done exactly the right thing.
"The message I gave them was make sure you get all your structures and rules and regulations in place before the money flows, because afterwards you can not do it then, it's too late. And that was one of Tainui's issues."
Mr Spencer says it is difficult to leave TGH. He has enjoyed the people and the long-term view iwi organisations take. But he feels strongly that no one should stay in one place for more than nine or 10 years.
"It needs a fresh look."
At TGH, that will be provided by the most recent board appointment, outgoing Fonterra chairman Sir Henry van der Heyden.
What is it about dairy men and Tainui?
"Waikato, my friend," Mr Spencer laughs.