Lunch in the boardroom: Mark Verbiest

MARK VERBIEST

• Chairman: Telecom, Transpower, Willis Bond Capital Partners
• Director: Freightways, Financial Markets Authority
• Consultant to Simpson Grierson
• Previous directorships: Government Superannuation Fund Authority, Southern Cross Healthcare, AMP NZ Office

From lawyer to chairman
When appointed Telecom chairman in December 2011, Mark Verbiest was not new to the telco giant – having worked as its top lawyer between 2000-08.

Previously a senior partner at Simpson Grierson, specialising in M&A and competition law, Mr Verbiest made the switch to in-house legal work after Telecom’s former chief executive Theresa Gattung approached him for the role as Telecom’s general counsel.

In his 18 months as Telecom’s chairman, Mr Verbiest has overseen its structural separation from Chorus, the appointment of chief executive Simon Moutter and, most recently, as many as 1230 job cuts as part of latest restructuring plans.

Mr Verbiest lives in Wanaka.

He talks governance to National Business Review reporter Georgina Bond and Henri Eliot of Board Dynamics.

How often are you in the office at Telecom?

“Generally, two weeks in four I’m in there in the office. But it depends on the month, and there are a lot of other stakeholder meetings outside the office.”

Boards govern and the chief executive manages – agree?

“Yes. But there’s no perfect answer in terms of where the line is. Start-ups, for example, are different. They often need more hands-on-assistance from the board.” Mr Verbiest previously chaired Wellington software start-up Aptimize. “I was much more hands-on with Aptimize than Telecom,” he says.

What’s the maximum number of directorships a director should have?

“There’s no set answer. But the key is ensuring you can allocate enough quality time and space to all your commitments. 

“A chair’s role is by necessity more time consuming. What people often don't realise is that directorships involve more than say one meeting a month. Often there is board committee work or particular initiatives that require board input (for example, significant acquisition or capital or debt fund raisings). In the case of a chairman, there is also regular one on ones with the CEO, and then engagement with board members between meetings.”

Mr Verbiest thought a lot about the size of his directorship portfolio when he accepted the chairmanship at Telecom and saw the need to shed some workload by resigning from some boards.

How do you think your have you stamped your mark on Telecom’s board?

“Sir Roderick Deane [former Telecom CEO and chairman] always valued different points of view and experiences coming to the fore and so lived and breathed diversity. Indeed, he supported the appointment of woman CEO. Wayne Boyd, in turn, has always seen the ultimate economic benefits of having smart people with diverse life/work experiences involved in leadership.

“The main difference now probably is that finding and identifying those people at board level is possibly more structured today.

"But the nature of the board has changed because the business has fundamentally changed, following the separation from Chorus. 

“Not long after I became chair, we revamped the information we wanted management to provide to remove some of the noise and to concentrate on key operating metrics for the 'new' Telecom. 

“And we agreed to be rigorous on testing assumptions and the like. We took a fresh look at board-related processes to recognise effectiveness, substance, simplicity and speed, giving a strong signal that we were looking to the future with fresh eyes, not on the basis of what and the way things had happened in the past.  This truly is a new business.”

Describe how you see the chairman/CEO relationship?

“There needs to be clear, open engagement and clarity in terms of what is expected, and the engagement has to be regular, in my view – weekly at least.

"Over-the-phone catch-ups are more often than not fine. But they need to be mixed with regular face-to-face contact.

“Boards need to be clear about what they expect of the CEO about engagement – not to control things, but to ensure things are co-ordinated in the right way. 

“The chairman also should be a sounding board for the CEO to use. They cannot share every issue with their teams, at least initially, so having the chair able to put forward a view to assist their thinking can be highly effective if handled appropriately. Our job is to monitor, coach and shape.”

Large board papers or small?

“Small. The CEO’s report is always the 'gold' in any board pack and time focusing on these is well spent.

“Simon Moutter and [Transpower chief executive] Patrick Strange are very good at giving you two- to four-page reports outlining what has been going on in the last period. You get a strong sense of how they are feeling and what is keeping them awake at night, and the most important issues they have to grapple with.

“If trust in the CEO is lacking, good boards will drill down to ask for more detail.

“I’ve seen situations where a weak board will not go far enough to drill down and ask the hard questions. And I’ve also seen good hard-arsed boards which do, and it can lead to less competent (or worse!) management leaving sooner rather than later.”

How would you improve corporate governance in New Zealand generally?

“It would be great if people focused on substance over process and keeping it simple. Kevin Roberts [fellow Telecom board member and chief executive worldwide of Saatchi & Saatchi] is a fan of this.

“There’s often a plethora of paper that is provided to directors and there’s sometimes too much analysis and the real issues get buried. More often than not, common sense suggests the issues are quite simple.

“Technology is readily giving people access to internal company information they feel they need to fill the gaps in their knowledge without clouding the decision making in the board room – ensuring time spent on effective governance is enhanced.

“It’s important boards don’t forget their core job is to run the business and add value for shareholders. That is it- one sentence describing our role. The process mustn’t detract from that. On the odd occasion directors need to be reminded of this and think, does this process really make a difference or are we just ticking a box?”

How do Telecom and Transpower’s boards stack up in the simplicity stakes?

“We’re getting there on simplifying things. Stripping out unnecessary process is a journey.

“The boards at Telecom and Transpower have invested time designing the ‘dashboard’ directors want to see in terms of financials and key operating metrics. I think we have got to a point where governance processes have developed well and there are well developed templates.”

What’s a typical Telecom board meeting like?

“A good mood prevails, even when we have to deal with tough issues. Everyone’s very honest and different views are expressed. We don’t always agree but we get there, and that is what diversity is about, and importantly disagreements are never personal. 

"There’s respect between board members and between the board and management, and a strong sense that we are in this together.

“We tend to get to the point quickly, with serious concentration on the major issues, and we don’t get wound up on trivial matters.”

Should boards have an annual board review?

“It depends on the nature of the board. Internal reviews work fine when there is real open-ness and transparency among board members. I’m fortunate because all boards I operate on are like that. However, periodically external reviews are very worthwhile. They tend to be more fulsome and often draw out matters the board might not otherwise spot. There is an expense involved, of course.”

Telecom and Transpower complete annual board reviews – some internal, some external.

What gives you most satisfaction as a chairman?

“Any feedback that shows decisions made are adding value. It might be a review of an existing capital structure to determine if the funding efficiency is right, seeing a customer initiative result in growth, or receiving positive feedback from customers and stakeholders.

“But first and foremost it is choosing and working with the right chief executive and, measured through results to shareholders, seeing that was the right choice. That’s the most important thing we do – making sure we have the right leader.”

Can you tell us about the search for a new chief executive for Telecom last year?

“[Simon’s appointment process] was pretty full on for several months for a few of us. It involved long lists, meetings about those lists, second and third interviews, short lists, more interviews, serious reference checks … and a lot of meetings and mind-share time, sometimes over a glass of wine, talking about how these people might operate in certain circumstances.”

What was your role in the recent tough decision about job cuts at Telecom?

“The board signed off on the strategy. We knew it was required – we were uncompetitive compared to our rivals in terms of cost structures, so costs had to be cut. No one likes doing it but it had to be done.

“I was also engaging with some key stakeholders to ensure they understood what was being done.

“But first and foremost it was Simon [Moutter] who fronted it. He’s accused of bluntness, but I think that is unfair. He has been upfront with people so they are left in no doubt about what’s going on. And there’s no way to sugar coat this – it’s the hardest thing you ever do as a manager or leader to tell someone they don’t have a job.

“Simon is very good at explaining to people the rationale for something, so they really get what is happening and understanding why, in this instance, it means less jobs.”

Are directors paid too much?

“I don’t think so. There’s a misconception as to what is involved and the personal risk people take – because if you make one doozy mistake that’s often your career gone as a director.

“A board’s role is to assist and shape, sometimes thousands, of people’s working lives. It’s not like a job on a production line, where you’re focusing on just one thing and don't have to worry about other people. To do your job properly you feel the responsibility for others. It can be hard for people to understand that difference.

“Sometimes the job’s politicised and that’s not helpful. And because of that, some very good candidates don’t put their names forward.”

A chairman’s role involves a great deal beyond running the meetings and chairing the AGM, he says.

“There’s the interchange with management through the chief executive, setting the agenda, ensuring strategy is effectively done and then executed, engaging stakeholders from regulators and politicians to analysts. It is seriously involved.”

What are your thoughts about improving diversity on company boards?

“The evidence says: more diverse boards and organisations produce better financial outcomes. And I have seen that not just in reports but in outcomes.”

Any female appointed to Telecom’s board is there on merit, Mr Verbiest says.

“There’s no tokenism, and the diversity issue is wider than just gender. Some people think those currently focussed on gender diversity short-changes the issue of broader diversity have got it wrong. It is a place to start.”

Are corporate boards in New Zealand best described as ‘male, pale and stale’?

“If you examine most large boards of listed companies and the SOEs, many are more diverse than you might think. There is a way to go, however.

“Boards are thinking more seriously about the skill sets they need to tackle the issues they face.

“The means of communication and the way people operate their lives are changing. I like technology, but I don’t for a second pretend to understand all the ways our customers use the media available to them. It makes perfect sense to think about involving people who do understand these things from a business or marketing perspective on boards.

“But don’t write off the experienced people,” Mr Verbiest says.

How can we bring more 'fresh blood' into the boardroom?  

“Getting recruiters and boards to start thinking about including younger corporate up-and-comers on prospective board candidate lists would be a good start. And if the candidates' employers recognised the benefits of freeing them up to maybe have one outside governance role, that would increase the pool of potential people, and their currency.”

Who has been one of your greatest mentors?

“When I graduated from my law degree I made a beeline for a firm doing Brierleys work in the early 1980s, where I was mentored by Colin Beyer.

“I was exposed to governance at an early age working with Colin at the forefront of novel things that were emerging on the corporate landscape to unlock value in companies. It was pre-'87 crash and there was lots of IPO and M&A activity and we were leading a lot of those processes. Then the crash occurred and we worked through the aftermath.

“It took five or six years post-crash to shake up the economy. Colin said to me at the time: 'these might seem tough times, but you’ll look back and think you were privileged to have worked through them because the experience will stand you in good stead going forward.' He was right.”

When is the right time for a start-up to consider having a board?

“Most often at the time of significant capital raising – that’s the time you involve a board. You need to be past the initial testing phase and have determined there’s a product or service people want to buy.

“Start-ups should ask: Are we offering a solution to a problem people have? If it is just sexy technology but doesn't solve a problem, then generally it won't sell. This might sound just like common sense, but you might be surprised how often people who develop ideas get captured by the idea without asking the question.”

What do you read?

Regularly: The Economist online, the Financial Times, the National Business Review, the Wall St Journal on occasion, magazines about my hobbies – golf, skiing, boating, mountain biking. The odd novel (often trashy!).

Final word for boards?

“Concentrate on the substance and remember what you are there for.”

The National Business Review’s ‘Lunch in the Boardroom’ series features talks with leading directors and chairman who share their insights about governance and lessons learned in the boardroom.

gbond@nbr.co.nz