Norris Ward McKinnon’s Commercial Brief
Hon Lianne Dalziel
12 September 2003 Speech Notes
Norris Ward McKinnon's Commercial Brief
Ferrybank Reception & Conference Centre, Grantham Street (on river), Hamilton
Thank you for inviting me to speak at today's event, which includes the launch of Norris Ward McKinnon's new-look Commercial Brief. I have had an opportunity to look through the September Brief and want to spend a moment saying how important this kind of newsletter is to business.
I guess since I have been Minister of Commerce I have paid more attention to the Business Pages of the main newspapers than I used to. Instead of skimming articles I now read them carefully, and although there are some exceptionally good commentators and journalists, I hate to say they are the exception. In re-establishing this commercial brief in the way you have, you have created an opportunity for informed comment on a wide range of commercial issues that either don't have a sufficiently wide audience to rate mention in an "infotainment' focussed media, or where the importance of issues is missed.
I attended the Joint Ministerial Council meeting in Sydney last month with Jim Sutton, Jim Anderton and on the Australian side, Senators Mark Vaile, Helen Coonan and Warren Truss. The media interest was focussed almost exclusively on the report that was released at the forum by the Australia-NZ Business Council. No one picked up that virtually everything that was raised in that report had been raised in the ministerial council.
And what is more significant progress was signalled in key areas such as Rules of Origin reform and trans-Tasman business law co-ordination.
It was almost as if the media decided "here is someone demanding something of the government; that's a good story. And besides which it would take too long to investigate that fact that the governments on both sides of the Tasman are actively engaged to resolve the issues raised.' It's lazy journalism, just to publish a press statement without doing any critical analysis or even asking the government to respond.
The Commercial Brief is probably not aptly named in that regard, because although it may be a brief, when you compare the space that is devoted to a serious consideration of issues compared to the mainstream media, then it is anything but brief.
The September issue has raised significant issues from Employee Share Option Schemes, to Intellectual Property in the colour purple, to Copyright and to Business-based Compliance Schemes. At the same time it summarises legislation before Parliament, alerting clients to areas where submissions may be warranted or simply alerting clients to law changes that are on the way.
I hope that I can be included on the mailing list, because it is often information like this that can generate political interest in changes in policy that are being sought on the ground as it were. For example I have a pre-existing interest in the concept of ESOPs as I knew them from my days in the trade union movement. I was attracted to the strengthened stakeholder status they gave employees, and therefore I was interested in reading of an industry desire to incentivise their use. I'd be interested in hearing more about what is being promoted.
I was also very interested in the business-based compliance scheme approach, as I could see it potentially reducing risk of non-compliance, which of course leads to sometimes, costly consequences.
I am sure my colleague, John Tamihere, who is Minister for Small Business, would be interested in this approach.
He has been undertaking work based on reducing compliance costs to small & medium sized enterprises, and what he has found is that it is often a lack of information or knowing where to access information that is a significant barrier.
I just want to say a few words about the work that I am doing in my portfolio, but really to focus on two areas where we are seeking specific feedback from the business community.
Corporate governance has become an international "hot topic' following the high profile collapses of businesses, including Enron, WorldCom, HIH Insurance and OneTel. These collapses have triggered numerous international reviews that have sought to examine the most effective means of promoting corporate transparency and accountability. Fortunately, New Zealand has been spared similar high profile experiences in recent times, however, this does not mean New Zealand can afford to be complacent.
While the risk of corporate failure in New Zealand might be perceived to be comparatively low, there is still a need for our corporate governance framework to continue to evolve in accordance with good international practice, in order to demonstrate that our regulatory regime is robust and credible and to safeguard New Zealand's reputation as a safe and transparent investment destination.
To this end, a number of reform initiatives have been carried out within the business community, including the ICANZ review of corporate transparency and the proposed NZX corporate governance listing rule changes. There is a growing recognition that the government needs to work closely with business institutions and representative bodies in order to raise market participants' awareness of their legal and ethical obligations and to promote a greater understanding of the benefits that will flow from adopting best practice standards.
Because I believe that improving corporate governance is a shared responsibility, I have asked the Securities Commission to lead the development of a set of corporate governance principles to establish a benchmark for shaping the behaviour of New Zealand businesses. The Securities Commission will report back to me before the end of the year.
I would like to say, however, that while government policies can set a benchmark, it is up to the business and professional community to promote a culture of ethical conduct, and to put in place good internal systems to both deter and detect behaviour that is not up to standard.
A related area with a focus on international standards is in financial reporting.
The Ministry of Economic Development is currently developing a discussion document which will consider how the Financial Reporting Act needs to be changed as we move towards adopting international accounting standards. We need to make sure that the Act fully recognises that the key future role for New Zealand is to effectively influence international accounting standards before they come into effect.
The adoption process raises critical issues for the New Zealand business community, for example:
- Which entities should comply with international accounting standards?
- Should there be exemptions for small and medium sized enterprises and for entities from the not-for profit sector?
I am aware that small business owners will be concerned that the adoption of international accounting standards does not result in the development of accounting standards that are too detailed or complex. They will also want to be sure that international standards do not result in the addition of new statutory reporting obligations that will impose excessive compliance costs.
I would like to emphasise that the government is committed to developing a financial reporting regime that fosters the timely disclosure of accurate and relevant information at least possible cost. The Ministry has carried out public consultation on financial reporting for small companies and the outcome of this work will be incorporated into the new Bill.
As you can see even with these two matters, we need input from the widest possible range of stakeholders, and the Commercial Brief represents an opportunity to present all sides of the debate in order to encourage participation.
I'll give you an example. Nine months ago I had a new responsibility added to my portfolio - the building industry reforms. I knew nothing about the building industry back then, however, last week I introduced a Building Bill that is a comprehensive re-write of the Building Act, and which introduces a licensing regime for building practitioners, an accreditation regime for building inspectors and a certification regime for building products and processes. Additional compliance costs have been identified and yet the industry has welcomed the changes. Why? Because they have been intimately involved in developing the framework. They can see the value of increasing the front-end cost and minimising the risk of failure that can increase significantly the cost - if you measure it over the life of the building.
This would not have been possible without the active participation of industry associations who informed their members and clients about the proposals from start to finish and actively engaged them in the process of change.
So I congratulate Norris Ward McKinnon, for the new-look Commercial Brief, which I believe not only represents value to their clients, but also the wider community, which will benefit from the detailed analysis that it presents on important and topical issues, which will enable informed debate.