Collins Judith: Companies (Minority Buy-out Rights) Amendment Bill — First Reading 
Collins Judith: Companies (Minority Buy-out Rights) Amendment Bill — First Reading 
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JUDITH COLLINS (National—Clevedon) 
: 
 I am grateful for the opportunity to speak in support of the Companies (Minority Buy-out Rights) Amendment Bill. Unfortunately like much of the legislation in the dying days of the Labour Government it is too little too late. As the contributions from the National side of the House have shown we in the National Party take seriously the rights of minority shareholders. One reason we do that is the headlines—for instance this one in the  
New Zealand Herald  
today: “Mortgage worries … fewer people taking loans as the housing market cools.” This could be considered a good thing except for the fact that the sharemarket has not been a place of safety for many investors—many mum and dad investors—in New Zealand. After 8 long years of a Labour Government the sharemarket is still not a place of safety. This Labour Government has spent an awful lot of time castigating people who buy more than one house which is very interesting because Chris Carter the former Minister of Housing has several houses. The Government spends a lot of time saying to people: “You shouldn’t be buying up houses and renting them out to people. You shouldn’t be doing these things. You should invest in other things.” Well what are the other things? Mum and dad investors with $40000 or $100000 to invest have to look not at commercial buildings because they cannot afford those but at a place like the sharemarket. 
Those investors should be able to rely on the sharemarket regulated by this Government and also by the New Zealand Exchange as a place where they can have a modicum of safety for their investment. But the fact is—and it is a sad fact—that votes are what count. In the sharemarket a person who has more money in shares will have more of a say. It is not untrue and it is not an exaggeration to say that most of the shares in the New Zealand sharemarket would be controlled by either big investment companies like AMP or by other private equity funders and shareholders. Those are the people who effectively control much of the wealth in the sharemarket. Yes we have lots of mum and dad investors lots of people out there with their life savings extra to their house in the sharemarket but those people effectively do not get much of a say except for the one meeting they get in the form of an AGM each year. 
What happens is that some of the company directors are appointed as independent directors. I would like to deal with the fiction that I see around the issue of independent directors. I ask members to just look at this example of an independent director: John Maasland who was chair of the airport company. John Maasland was acting as the independent director making decisions he felt were in the best interests of the company so instantly he was given the word that he would be shifted on because the big shareholders—the Manukau City Council and others—would make sure that he is not the independent chairman. That is obviously a right; it is allowed under the law. But why do we put so much faith in a situation that is effectively fictional because the independent directors like all other directors are in fact elected at the AGM? They are elected by the shareholders and if the shareholder voting power is with a great big investment company the great big investment company will decide whether that director stays the next year. So we put an awful lot of pressure onto our independent directors without actually giving them the ability to be truly independent without the fear that they are going to lose their positions. I pay tribute to some of the independent directors whom I have worked with and whom I have seen over the years make decisions that have been truly in the best interests of the company even if a particular majority shareholder or a very powerful shareholder did not like those decisions because they were not necessarily in the interests of that shareholder. 
It is very important for us to understand that we will not become a wealthy country until we have a sharemarket that the people of New Zealand can have true and total faith in and we will never have that if we consistently think that just because something is legal then it is OK. Well it is not always OK. In fact we find over the years that many minority shareholders have felt that they have had very little voice. I welcome the attempts of the Government to do something about that—around the valuation of minority shares and the buy-up provisions. But I would also say to the Government that we can say all we like about going off to arbitration and about taking court actions to protect one’s interests as a minority shareholder but the vast majority of our minority shareholders are mum and dad investors who are aged 65-plus and who will never go off to take complicated expensive and very very tiresome legal action to protect their rights. It is important that we start to address the culture that has allowed some companies—in my opinion—not to do the right thing by minority shareholders. Of course democracy is one of those things that are great when they work for one and not so great when they do not. For some minority shareholders the democracy of the share voting power can have very disastrous consequences. 
I am very concerned that the Government in its last dying days is now talking about minority shareholders rights. Having said that I ask what it is doing about the agencies that were set up to protect some of these people—that is the Serious Fraud Office and others? It has brought the Serious Fraud Office back into the Ministry of Justice—a ministry that has shown itself to be completely in with the police. The Ministry of Justice shows itself so completely incapable of coming up with any policy that it now relies on Sir Geoffrey Palmer at the Law Commission to put forward all its policy. That seems to me to be an indication that we need to go significantly further than the provisions that people are talking about in this bill. 
I also take the opportunity to acknowledge the work of some of our commentators in this shareholding area—the work of people like Bryant Gaynor for instance in the  
New Zealand Herald  
who has— 
Hon Paul Swain 
: Brian. 
JUDITH COLLINS 
: I did say Brian did I not? I did say Bryant. I am sorry I meant to say Brian. I thank Mr Swain. Brian Gaynor has spent a huge amount of time and effort looking at companies in many cases from the minority shareholder point of view. Over the years as a company director Mr Gaynor has been extremely irritating at times but the fact is that the work he does is extremely helpful to many independent and small investors who have had to look at the  
New Zealand Herald  
to get a view as to whether they should be investing. Sometimes unfortunately with the way in which initial public offerings are handled through sharebroking companies and through the financial markets the commissions that are paid and the deals that are done mean that the independent advice tends to come from people like Brian Gaynor—and I should say from the work of people like Bruce Sheppard from the New Zealand Shareholders’ Association. People like him have been willing to come out and sometimes make a bit of a stunt in the old AGM and carry on in some way that certainly gets some notice. But behind all the stunts and the rhetoric these people are with others standing up for the rights of minority shareholders. I know it is not always a view that is particularly popular around the board tables but I believe it is extremely important that New Zealand get rid of its cowboy reputation in relation to its companies. 
I do not believe that this Government will necessarily regulate a change in attitude but I do not think we need to look too far to see that there have been a lot of people not only in the sharemarket area but in the finance company area who have made a lot of money out of a lot of very small investors and who are not held to account. They are certainly not held to account anywhere except in the court of public opinion. When we look at why New Zealanders have so much faith in investing in property I think we do not need to look very far to see that a lot of it is to do with a lack of faith in the way in which some few—I say “some” because it is certainly not all—few people have manipulated minority shareholders for their own ends. 
This is a bill that is well overdue. However it is only a very small attempt at a very late stage by this Government to do anything for minority shareholders. National will certainly support the bill going to a select committee. We will hope to see something better come through after that process; we will certainly be putting big efforts into that.