New Xero boss in danger of over-committing with Telstra, Fletcher roles: NZSA

Shareholders' Association raises questions, and proffers a suggestion. Xero shares take 6% hit.
Shareholders' Association head Michael Midgely: One outside directorship can broaden perspective, two is a bridge too far.

Is incoming Xero chief executive Steve Vamos in danger of being overcommitted?

Xero has confirmed its new boss will maintain his outside directorships after starting his new role on April 1. Both involve companies facing major challenges.

“I intend to stay on both the Fletcher Building and Telstra boards. Obviously, how things evolve in the future will be subject to really getting my thinking on workload but also consultation with my chairs and those organisations I work with," Mr Vamos said in a conference call yesterday, after a UBS analyst raised his multiple roles.

Yesterday, some NBR readers were dubious about that proposition.

“If Steve Vamos is serious about taking on a company like Xero and building it, he has to be ‘all in.’ I'm sure shareholders do not want a part-time CEO,” posted Andrew Percy.

Norman Godden offered, “Steve Vamos continuing with his directorships of both Fletcher Building and Telstra is a recipe for disaster. Xero needs total focus and all of the time that a chief executive has available without the distractions of two huge dinosaur companies, both of which have significantly declining share prices.”

NZ Shareholders' Association (NZSA) chief executive Michael Midgely also has reservations.

“NZSA’s position is that sometimes it’s a good idea for someone to have one [outside] directorship. It can give someone a wider knowledge of a field,” Mr Midgely says.

But two is a bridge too far. And Mr Midgely notes that Fletcher’s chairman, Sir Ralph Norris, recently commented on the board’s heavy workload. (And it could get harder; Fletcher has hardly had a purple patch since Mr Vamos became a director two years ago.)

“Let’s hope that, when he reviews his workload, that he reconsiders at least one of those,” the NZSA chief executive says.

The choice
So should Mr Vamos dump Telstra or Fletcher Building if he does decide the workload is too much?

Mr Midgely says he’s not familiar enough with Telstra to say if the Australian should favour that board but he can see why Fletcher might battle for Mr Vamos’ affections.

“Mr Vamos clearly has some important talents that board is lacking,” the NZSA head says. He has been on the Fletcher board since November 2015.

The deep, multi-faceted problems facing Fletcher Building have been well documented.

Across the Tasman, Telstra faces similar industry-in-transition issues to Spark, with the added complication that the NBN (Austalia’s equivalent of our UFB) has seen frequent changes in strategy and direction as the political winds have changed around it.

NBR’s view: Telstra – also in the tech space and a current Xero partner – would be the logical board seat to keep if Mr Vamos does decide to rationalise his time.

Xero also confirmed this morning that its new chief executive will work from the company’s Sydney office, not Xero’s headquarters in New Zealand, which will put him in closer proximity to the Aussie telco.

The online accounting software company's shares [ASX:XRO] fell 6.03% to $A30.85 yesterday after news broke that founder Rod Drury would step down as CEO. 

Fund manager Lance Wiggs said Mr Vamos' appointment had a sudden feel. Mr Drury said it had nothing to do with his recent split with his wife.


RELATED VIDEO: Punakaiki Fund manager Lance Wiggs on Xero's future (Mar 5)

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