US EPA

7122443 

Journal Article 

Governance of the Economic Engine Room: Insights From Agricultural Governance in New Zealand 

Lockhart, J; , 

2011 

ACAD CONFERENCES LTD 

NR READING 

254-261 

WOS:000308066600030 

The site for much governance research over the last two decades has been publicly listed companies. The perspective through which the majority of that research has been undertaken is one of agency. However, in many economies small to medium enterprises (SMEs) make a disproportionate contribution to national wealth. Neither the features nor the requirements of their governance are well understood. The aim of this paper is to present the results of a year-long study of the governance of SMEs (overwhelmingly family firms) in New Zealand's agricultural industry. It is of significance that these businesses collectively account for NZ$23b in exports annually (some 68 - 72% of foreign exchange earnings from trade). In short, they represent this first world nation's economic engine room. During 2010 the researcher met with some 450 SME owners in New Zealand's agricultural sector and discussed with them the attributes of their business's governance. Day-long workshops were held at 18 sites throughout New Zealand. Each workshop was attended by about 25 - 30 business owners, holding some NZ$1.0 - 2.0bn of assets on each occasion. The technique of enquiry learning was used to stimulate discussion among participants with the researcher as facilitator. Ethical approval for the research was sought and the project was evaluated by peer review and judged to be low risk. Results were captured through written surveys on occasions, and verbal and physical acknowledgement in response to specific questions on others. The processes of critical reflection resulted in full participation at each workshop, and when conducted (three times), a 100% survey response rate was achieved. Given the nature of participant selection there is the likelihood of a positive bias. The majority of businesses were held by companies, trusts or some combination of company and trust (94%). The most common model was found to be one where physical assets were held in a family trust, with a company legally responsible for trade (72% of participants). The owner-operator as a sole trader was found to be very rare (6% of participants). On equally rare occasions was third party equity capital held in the businesses. Independent directors or other features of best practice governance (including formal planning and reporting to shareholders) were the exception rather than the rule. Governance appointments external to family members, the owners, were most often bestowed on 'family' accountants (21%) and 'family' lawyers (11%), often as professional trustees. Inherent conflicts of interest were not recognised by business owners. Nor was enhanced formality of process perceived by the inclusion of these professionals. In summary, SMEs in the agricultural sector in New Zealand, despite making a disproportionate contribution to the economy, were found to be deficient in the most common attributes of business governance. The dominant attributes are best described as being those of founder-lead entrepreneurial governance where no distinction is upheld between the multiple roles of shareholders, directors or managers. Further, those businesses in transition to more mature governance were typically found to be reliant on professionals in close proximity to the business owners. Who, incidentally, do not appear to discharge their responsibilities in a manner whereby conflicts of interest were well managed. While this may not be harmful to business performance in the short term it does raise the question of missed opportunities. 

founder-led governance; mature governance; governance research; SME governance; New Zealand 

Despres, C; 

7th European Conference on Management Leadership and Governance 

Antibes, FRANCE