Decision to quit the right one for former Fletcher boss
Ignominious as it is for Sir Ralph Norris to step down as chairman of Fletcher Building, his decision is the right and only one to make. The stewardship of his Fletcher Building board has been a disaster. An otherwise long and glittering corporate career in both Australia and New Zealand is inevitably tarnished by the failure of New Zealand’s largest construction company during a construction boom.
Shareholders at Contact Energy might legitimately ask whether Norris, who got off to a shaky start at his first annual meeting as chairman in 2015 by referring three times to Contact as Origin Energy, is the right man for the job there now too.
Norris may argue that the problems that have emerged over the last year were already embedded when he rejoined the Fletcher board in 2014, but that strikes a lame note in 2018.
Quite apart from anything else, the board should have realised it had a tiger by the tail with former chief executive Mark Adamson, who earned a reprimand from Norris’ predecessor, Ralph Waters, over arrogant public comments in which he boasted, in effect, the board didn’t understand what he was doing but backed him anyway.
Institutional investors will, presumably, also be looking askance at the rest of the Fletcher Building board and asking who else should go, and who could do a better job. For example, this is a serious blow to the reputation of Tony Carter, who chairs Air New Zealand, Fisher & Paykel Healthcare, is a director of ANZ Bank and built his governance career on his success as chief executive at grocery cooperative Foodstuffs.
Investors will also legitimately be questioning whether Fletcher Building should continue to own
Price escalation accompanies booms in a small market, and that has caught Fletcher Building out.
its building and interiors unit.
The company appears confident it can continue to produce and supply a wide range of materials for use in construction and infrastructure projects profitably, and its residential construction and horizontal infrastructure divisions appear sound.
The issue has been with overextending into ‘‘vertical infrastructure’’ – high rise buildings. There, its skills as a large-scale project manager have been woeful and its decision to pull back from anything other than project completion suggests disposal is among options the board will consider.
Yes, former chief executive Mark Binns was right late last year to say that people ‘‘obviously don’t know much about construction’’ if they assume boom times equal easy profits.
Price escalation accompanies such booms in a small market, and that has caught Fletcher Building out. It’s difficult not to conclude that the company, whose history has been as a supplier to government projects since the advent of state housing in the 1930s, was so desperate to keep any competitor at bay that it offered silly prices to build marquee projects, especially the Auckland International Convention Centre.
That one, remember, was the subject of widespread criticism over the way Fletcher Building emerged as the contractor without a normal tender process.
In retrospect, then Economic Development Minister Steven Joyce might be seen to have got a pretty good deal for taxpayers, but Fletcher shareholders won’t be seeing it that way now.