An Examination of Shareholder–Stakeholder Governance Tension: A Case Study of the Collapses of Ansett Holdings and Air New Zealand

Abstract

For decades the majority of contributions to governance practice have been compliance-focused while much governance research has been grounded in an agency view (Daily, Dalton & Rajagopalan, (2003), Academy of Management Journal, 46(2), 151–158). Much of that effort has failed to observe the key drivers of boardroom decision making. The objective of this research was to explore the shareholder–stakeholder tension within an organisation as it progressed through sequential forms of ownership. The results presented in this paper are primarily drawn from the immediate ex poste and ex ante events surrounding the collapse of Ansett Holdings Ltd and the latter government bailout of Air New Zealand. New Zealand's national airline provided a relevatory case (Yin, (1989), Case study research: Design and methods (Rev.ed.). Newbury Park, CA: Sage), the opportunity to study a phenomenon previously inaccessible to research, because data hitherto unavailable ‘entered’ the public domain. However, when reinterpreted in light of direct input from key executives involved – benevolent informants – much of that data needs to be reconsidered to better understand why critical decisions were made. The Ansett collapse subsequently became the single largest corporate collapse in Australian history while the loss to Air New Zealand became New Zealand's largest-ever corporate loss. The decision by Brierley Investments Limited (BIL) to ‘block’ Singapore Airline's (SIA) entry into the Australian market, implemented through the high risk acquisition of the balance of Ansett, directly resulted in both ‘collapses’. Decisions by the organisation's governance were found to have a direct impact on the performance of Air New Zealand through various phases of its ownership. While the ‘collapses’ are attributed to a failure of governance to act in the organisation's (stakeholders) interests. Growing tensions between shareholders and stakeholders were observed to be suppressed as the BIL dominated and led Board achieve complete control over decision making. There remains considerable opportunity to further governance research through the examination of business ethics, notably the view that appropriate ethics can be met by way of legislation (e.g. Diplock, (2003, April), Corporate governance issues. Securities Commission of New Zealand. Available from: http://www.sec-com.govt.nz/speeches/jds240403.shtml). However, the role of governance, particularly whom it is there to serve requires far greater attention on behalf of researchers. In the cases of Ansett and Air New Zealand the Board ceased to act in best interests of the organisation in favour of the major shareholder.

Citation

Lockhart, J.C. and Taitoko, M. (2005), "An Examination of Shareholder–Stakeholder Governance Tension: A Case Study of the Collapses of Ansett Holdings and Air New Zealand", Lehman, C.R., Tinker, T., Merino, B. and Neimark, M. (Ed.) Corporate Governance: Does Any Size Fit? (Advances in Public Interest Accounting, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. 223-246. https://doi.org/10.1016/S1041-7060(05)11010-4