Ross Armstrong may face last post
Wanted: Chairman for New Zealand Post. Must grasp the big picture
and new economy realities. Core competency: Business acumen. Political operators need not apply.
The job description may not have been written yet, but behind the
scenes there have been questions over Ross Armstrong's continued
chairmanship of NZ Post.
This would not have been apparent to revellers at Friday's St
Patrick's Eve Banquet in Auckland, as Armstrong and Deputy Prime
Minister Jim Anderton sat down to a night of conviviality.
Both men had reason to be pleased. NZ Post's controversial foray into banking had been approved. Armstrong had secured Government funding to invest in a new business and obtain an income stream to offset NZ Post's declining revenues
from traditional postal services. Anderton finally had his People's
Bank, a home-grown weapon to attack the Australian-based trading
banks that dominate New Zealand.
Armstrong's term is not up until December this year. But in my view the political risk to the Government from having one person chairing two controversial state enterprises – NZ Post and Television New Zealand – has become too high, particularly as Armstrong's highwire tactics in defence of NZ Post's banking push have made him a fixed target for the opposition National Party.
There are other reasons to consider a change at the top of NZ Post.
The challenges ahead require a player who is not distracted by the
chairmanship of another powerful SOE which is also undergoing a
major shift in emphasis.
Last week, NZ Post announced it had reversed its profit slump and
recorded an interim net profit of $22.4 million in the six months to
December 2000.
Adroit cost-cutting by chief executive Elmar Toime and the
refinement of NZ Post's international investment activity ensured a
turnaround after the disastrous $3.8 million June quarter loss last
year – recorded as the company shifted its balance date from March
31 to June 30.
The restoration of NZ Post's profit to a level marginally above the
1999 interim result means Toime's own position is assured. However,
NZ Post's profit is still below the $30 million achieved in the
1999-2000 year and could yet be eroded if the company loses
substantial market share in its core businesses.
As NZ Post morphs into banking activities to make up for losses of
market share in its core business, the composition of its board will
also need to be addressed.
When National last month started leaking the contents of
confidential NZ Post documents which questioned the commercial
viability of the SOE's banking proposal, NZ Post directors with
National Party connections came under political suspicion.
The reality was that directors such as former National cabinet
minister Philip Burdon and former National MP Graeme Reeves had
already been replaced on the board when their terms expired late
last year. But that was lost in the political heat of parliamentary
debate.
Two other directors – Wellington company director Paul Baines and
Auckland-based Glennis Webber – will be replaced when their terms
expire this month.
Finding replacements with the skills for what is now a politically
charged board will be quite a task.
NZ Post must also appoint an establishment board for its banking
arm. While Toime has a management team working up the proposal, he
expects an establishment board comprised of existing NZ Post
directors and senior management together with some outside
appointees to be driving progress by July. Once the establishment
process is finalised, the banking subsidiary board will have an
independent chairman, although there will be some common directors.
The move into banking activities is not the only challenge NZ Post
faces. While other international postal agencies dovetail banking
facilities in the same branches, NZ Post's decision to in effect
re-establish the old pre-privatisation New Zealand Post Office
Savings Bank is a risky venture.
NZ Post does not have a core banking competency any more. That was
lost when the banking and postal arms of the New Zealand Post Office
were split off and the former was sold to ANZ Banking Group.
Swift commercial players such as The Warehouse will move on to its
designated patch with well-branded banking services while NZ Post's
banking arm is still moving through its establishment phase.
What is now urgently needed at NZ Post is a big-picture focus.
That is where a new chairman comes into play.
Armstrong has been a NZ Post director for most of the 1990s.
His own commercial background is as a one-man-band fish exporter.
His strong connections as a former Auckland divisional chairman of
the National Party gave him the political smarts to work informally
on the retention of the rural delivery service when it came under
attack by the ideological right wing of the previous National
Government.
But while NZ Post has diversified by investing internationally, it
has been too slow to grasp the reality of the internet age. An
adroit NZ Post could have moved swiftly to form New Zealand's first
substantial internet service provider. By adding on banking
facilities, NZ Post is taking an old economy move rather than
rethinking its fundamental business.
Telecom is moving on to its e-billing market and while NZ Post's
venture capital wing, NZ Post Enterprises Group, has invested in a
raft of small IT businesses on top of the SOE's holdings in Datacom
and Datamail, it is all incremental stuff.
Postal deregulation has also spawned a host of competitors for NZ
Post. These are relative minnows, but Toime acknowledges stronger
players will emerge as an inevitable merger process begins.
Not long after the Government took office, a few business players
were informally sounded out over the NZ Post chairmanship role.
No criticism of Armstrong was intended. At that stage he was being
targeted for chairmanship of Television New Zealand and advisers had
been concerned about the wisdom of one person holding two SOE
chairmanships.
But the political situation has since toughened.
When Armstrong stepped out and accused National's Jenny Shipley of
"fiscal treason" for releasing part of the Cameron & Co report on NZ
Post's banking proposal, his verbiage smacked of a political rather
than a commercial response.
When he later initiated High Court action against Act's Richard
Prebble for continuing to release material from the report his
judgment again came under scrutiny.
While Armstrong succeeded in getting Government approval for NZ
Post's plan to establish a new publicly owned bank, $78.2 million of
startup costs will come from the Government.
The bank will continue to draw fire, particularly, as the
Government's approval has been motivated as much by political goals
– keeping Jim Anderton happy – as by commercial reasons.
In this highly-charged environment it would make sense for the
Government to bring on a new player who does not have political
baggage.
Copyright 2001 New Zealand Herald.
Source: World Reporter (Trade Mark).
NEW ZEALAND HERALD, 19th March 2001
