Corporate Governance: Ownership Structures and Board Models

Running head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
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Table of Contents
Introduction................................................................................................................................3
Ownership structure:..............................................................................................................3
Fonterra Cooperative Group:.............................................................................................3
Sky Network Television.....................................................................................................4
Ngai Tahu Holdings Ltd.....................................................................................................4
Models of Corporate Governance:.....................................................................................5
Anglo-US Model:...............................................................................................................5
German Model:..................................................................................................................6
Japanese model:.................................................................................................................6
Anglo-US model of Sky Network Television Ltd.............................................................7
Europe's two-tier model implemented on Fonterra:...........................................................7
Japanese model of corporate governance:..........................................................................8
Two Tier Model of Fonterra..............................................................................................8
SKY TV’s Principle based model......................................................................................8
Japanese Model of Ngai Tahu............................................................................................8
Discussion:.................................................................................................................................8
Legal responsibility of the board:..........................................................................................9
Compliance......................................................................................................................10
Ethical Behavior...............................................................................................................13
Treaty of Waitangi:..........................................................................................................15

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Social Responsibility........................................................................................................16
Yearly Dividend Payout Ratio-SKY TV Network...............................................................18
Recommendations:...................................................................................................................20
Conclusion................................................................................................................................22
References................................................................................................................................23

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Introduction
Bob Tricker in his bestselling book "Corporate Governance: Practices, Procedures,
Prowers" defines Corporate Governance as "The governance role is not concerned with the
running of the company, per se, but with giving overall direction to the enterprise, with
overseeing and controlling the executive actions of management and with satisfying
legitimate expectations of accountability and regulation by interests beyond the corporate
boundaries" (Tricker, Corporate Governance-Principles, polices, and practices, 2015). In this
project, the corporate structure and board models of 3 companies namely Fonterra
Cooperative Group, Sky Network Television and Ngai Tahu Holdings Ltd. are analyzed. The
unique feature of the Fonterra cooperative is that around 10,500 farmers own it. Sky Network
Television Ltd. is a media and entertainment channel of New Zealand. Ngai Tahu Holdings
Ltd. is an inter-generational investment company (Tricker, 2015).
Ownership structure:
In this part, the ownership structures of each of the three above-mentioned companies
have been discussed.
Fonterra Cooperative Group:
Fonterra is a world famous dairy company in New Zealand owned by more than
10000 farmers and their families. Since its foundation, it is dedicated to the best standards of
corporate governance and management (Fonterra, 2018). It was formed after the
amalgamation of New Zealand Dairy Group and Kiwi Dairy Cooperative and the New
Zealand Dairy Board. Institutional investors are generally the largest group participants and
they can have impact on the prices of shares by their buy-sell decisions Fonterra has
institutional ownership of 7.99% (NZSE:FCG Ownership-summary May 11th 18). Another

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category of shareholders of the company is the company insiders. Fonterra though hold
minority stake in insiders, still being a large capital company, it is significant. General Public
ownership has around d 91.5% of shares in Fonterra (Fonterra, 2018). Thus, their shares are
very popular among retail investors. Private companies hold a meager amount 0.45% of
shares of Fonterra (Fonterra, 2018).
Sky Network Television
Sky Network TV Ltd, an entertainment company based in New Zealand. It is the
public listed company. It is listed as SKT on New Zealand Stock Exchange and Australian
Stock Exchange (SKY About us, 2018).. The board of directors of SKY Network is
appointed and elected by ordinary resolution at the annual general meeting of the
shareholders (SKY TV, 2018). As on 9 August 2018, there are 5 main substantial security
holders of SKY under "Financial Markets Conduct Act 2013". They are Kiltearn Partners
LLP; Harris Associates L.P.; BlackRockInc; Allan Gray Group; Harris Associates Investment
Trust. They hold around 49.9% of the total share of SKY TV (Myllylahti, 2017). CEO John
Fellet is the largest individual shareholder. Some of the largest shareholders of the company
are HSBC Nominees Ltd (48.2%); JPMorghan Chase Bank NA NZ Branch (9.24%); Citibank
Nominees Ltd (9.03%); HSBC Custody Nominees Ltd (7.95%) and many more (Annual
Report, 2018).
Ngai Tahu Holdings Ltd.
Ngai Tahu is a Maori Business Entity which is community owned. Te Rumania o
Ngai Tahu or the Ngai Tahu Charitable Trust is the only trustee operates and own Ngai Tahu
Holdings Corporation Ltd and their subsidiaries. The members of the Maori community will
select and elect the new directors in the annual general meeting. They can also be removed by
consensus (Ngai Tahu, 2018).Around 10% of the Ngai Tahu share is being held by Ngai

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Tahutanga, whereas TeAoTuroa held 10%; Oranga held 5%; WhaiRawa held 13%;
Matauranga held 11%; PapatipuRunanga 23%; TeWhakaariki held 6% and finally there are
18% tribal representation in NagiTahu distribution (Ngai Tahu Annual Report, 2018).
Models of Corporate Governance:
The process by which companies is run is known as corporate governance (Carroll,
2012). There are different models of such governance that are available all over the world.
There is ambiguity and difference of opinions about which particular model is best; however
each model has its own set of advantages and disadvantages (Carroll, 2012). Models are
developed and implemented following the rules, regulations and laws of the countries from
where they originate. Mainly they are Anglo-US model, German model and Japanese model.
Anglo-US Model:
The Anglo-US model works based on a system of individual or institutional
shareholders who are mainly the outsiders of the corporation (Passador, 2016). The other key
players of the corporate governance are triangle management and board of directors. The
board of directors comprises of insiders (the executive directors) and the outsiders (non-
executive director or the independent director). Traditionally one person occupies the chair of
both the CEO and the chairperson of the board of directors. This model depends and works
on proper communication between the three triangles of the corporate governance but the
important decisions are usually taken by shareholders. The managers are appointed by the
directors who are appointed by the shareholders (Passador, 2016). The board has limited
ownership stakes in the company. The individual shareholders and institutional shareholders
more or less have equal control on the ownership. Professional managers having negligible
ownership usually run the company. There is a clear separation of management and
ownership.

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German Model:
German model is a two-tier model, as it comprises of supervisory board and the
management board. The two boards are very distinct. Hence, no one can serve both the
boards simultaneously. The size of the supervisory board is determined by law and cannot be
changed by the shareholders (Passador, 2016). The key players here are the banks and
corporate shareholders. There is restriction on the voting rights; hence, voting rights of the
shareholders are limited to a certain percentage of the company’s total share capital.
Management board is responsible for management of the company, supervisory board for
appointing the management board and the shareholders along with employees mainly appoint
members to the supervisory board. In this model, the majority shareholders are banks and
financial institutions (Passador, 2016).
Japanese model:
The Japanese model incorporates a high level of ownership by banks and affiliated
companies. This type of model reflects the cultural relationships in the Japanese keiretsu
network where boards are large and ritualistic. In this model, the insiders account for the
board of directors (Spiller et al., 2011). Insiders and their affiliates are the main shareholders
of this type. In this category, the four key players are the main bank (major insider
shareholders), affiliated company or keiretsu (a major inside shareholder), management and
the government. Non-affiliated share holders have negligible or no contribution in Japanese
governance. Hence, there lie only few independent directors (Spiller et al., 2011).
In this regard, it can be said that the Sky Network Television ltd. follows the Anglo-
US model, Fonterra followed German Two-Tier model and Ngai Tahu Holdings follow
Japanese model of corporate governance.

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Anglo-US model of Sky Network Television Ltd.
One of the notable characteristic of Anglo-European model is that the same person
serves the chair of both Chairman and CEO. Peter John Macourt is the present CEO cum
Chairman of the company (Tricker, 2015). The keys players of the Sky Network are the
management, shareholders and board of directors. The board of directors consists of both
executive and non executive directors. Sky Network Television Ltd. is registered in New
Zealand. Company laws are based on common law of the country. Governance will be based
on principles. Proper Corporate governance codes will be followed. The shareholders usually
take important decisions (Tricker, 2015).
Europe's two-tier model implemented on Fonterra:
Features of this model are that the Company registration is at a country level. Fonterra
is registered in New Zealand but they operate is almost all over the world. Company law is
based upon the rule based on civil law. Governance is implied in law (Victoria Stanciua,
2015). They follow all the regulations and laws related to dairy governance. Fonterra has
followed international accounting standard. The key players of Fonterra are banks and
corporate shareholders. None of the members serves both the boards as it is against the
principle of two-tier system. Fonterra ownership is limited as Fonterra gives importance to
control rather than money and ensures that ownership is limited to the trustworthy members
in the corporation. Fonterra has two types of Directors; they are the Elected Directors and the
Appointed Directors. On the board, Fonterra has around 13 directors, according to Annual
Report 06/07 (Finn, 2014). Nine out of these are elected from shareholder base, which are
called elected Directors (Finn, 2014). The rest are selected by the Board and confirmed by the
shareholders at the annual general meeting, they are called appointed directors.