Governance Bites #147: governance and leadership in national scale crises, with Sir William Birch

Sir William (Bill) Birch brings decades of high-level public leadership and governance experience to the conversation. A senior figure in New Zealand politics for more than two decades, he held several key ministerial portfolios, including Finance, National Development and Energy. During his time in government he was closely involved in major economic reforms and policy decisions that shaped modern New Zealand’s public sector governance. Since leaving Parliament, Sir Bill has remained active in the governance community, serving on a range of corporate and public sector boards. His experience spans government decision-making, board oversight, and strategic leadership, giving him a rare perspective on how governance works across both the public and private sectors.
In this episode, Mark Banicevich interviews Sir Bill Birch on governance and leadership during national-scale crises. Drawing on experience at the highest levels, Sir Bill explores how leaders make sound decisions amid uncertainty, balance speed with discipline, and maintain public trust under pressure. The discussion reveals parallels between government cabinets and corporate boards, practical steps for crisis readiness, and the enduring qualities that define effective leadership. A must-listen for directors and executives preparing for the unexpected.
Book: ""Bill Birch: Minister of Everything"" by Brad Tattersfield, https://natlib.govt.nz/records/42822277
#governance, #leadership, #crisismanagement, #boardofdirectors, #corporategovernance, #riskmanagement, #decisionmaking, #leadershipdevelopment, #publicsector, #executiveleadership, #trust, #strategy, #businesscontinuity, #resilience, #directors, #governanceinsights

Transcript

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Hi, welcome to Governance Bites. My name is Mark Banicevich, and today I have the absolute honour of spending time with the Right Honourable Sir William Birch. Sir Bill, thank you very much for your time. Sir Bill was a Minister of Parliament in New Zealand for 27 years, from 1972 through to 1999, and then followed a governance career afterwards. So, there's a huge number of topics that we could cover with Sir Bill. The first topic that we're covering today is governance and leadership in national-scale crises. Sir Bill, I really appreciate your time today. The first question that I have for you is: when a country faces a major shock - you had, for example, the oil shock when you first joined politics - information is incomplete and often contradictory. What governance principles help leaders make sound decisions when you just don't have all the information? Yeah, the best example that I can give is my experience during the, really, it was the second oil crisis, when I was Minister. That arose out of a restriction in supply, for various reasons, and the Government had to face either rationing or some other device to ensure that there was enough gasoline and jet fuel and diesel, which are all sort of drivers of our economy, to keep the economy going. So, it was an extremely difficult question, and it wasn't going to be something that you could just decide overnight. I had the benefit, as the Minister, of an existing Maiden Committee under Colin Maiden, who was one of the experts, energy experts in New Zealand, and Colin was a superb person to work with. Knowledgeable, had a lot of technical experience, was a qualified engineer, knew a whole lot about the various forms of energy. And his Maiden Committee was an advisory committee to the Government of the day. When I became Minister, he was my adviser. And he also recommended that we establish a Liquid Fuels Trust Board [LFTB] under a different set of officials, but involving the Ministry of Energy. And private sector people, as well. To advise on the best use of the Māui gas field, which had recently been discovered, and where the previous Government had a take-or-pay agreement, which meant the Government had to pay the oil companies whether they took it or not. So, it was absolutely essential that the Government found a practical outlet for the consumption of that gas.Yes. And so we were advised, and we accepted the advice, that we should immediately expand the gas reticulation. So, we provided gas pipelines to a lot of the centres in New Zealand. It wasn't possible to go to the South Island, but we did establish a liquid natural gas facility as something that the South Islanders could use, which didn't involve any reticulation. But a lot of the biggest centres in New Zealand were reticulated with natural gas and provided gas for cooking and for industrial uses. But that wasn't enough to take up all the huge volume from the Māui gas field, and so we looked at converting the natural gas into liquid fuel, into synthetic fuel. Yes. Right. And we invited proposals from various entities in the energy industry internationally, and Mobil came forward with a proposal to use the Māui gas to make synthetic petrol. And we put that to a very thorough test. I personally visited the Mobil plant in [the United States of] America and saw the synthetic natural gas being used in vehicles and other purposes. And on the advice of Colin Maiden, of the Liquid Fuels Trust Board, and after negotiating with Mobil, we agreed to build the Motunui natural gas plant. And we did the core tenders, and it was built on time and on budget, which went very well. We had to go through some of the Resource Management Act [RMA] processes. There was a bit of opposition to building it in Taranaki. But in the end it was built, and we built pipelines to take the synthetic fuel to the Marsden Refinery. We expanded the Marsden Refinery so that we could actually, we upgraded it so it would produce diesel and jet fuel, and we built pipelines from Marsden back to the aerodrome, so the jet fuel could be piped to the aerodrome. A lot of those big infrastructure investments that were made during that time, like the Marsden Refinery and the gas pipelines and the Motunui plant, were not supported by Labour, and when they became the Government, they actually, well, they shut down the Marsden Point, which was vandalism. It was just a terrible mistake to do that. It just left us so exposed to shortages, and we can no longer make any diesel up there. I know there was talk there of reopening that, but there's a huge cost of having to get that going again. So, we went through all those processes, and I think the key to it, in terms of taking the public with you(because we did take the public with us, we got good support from the public) was to be able to demonstrate that you were getting the best possible advice internationally. Yes. And you were looking at all the options, and you were doing it thoroughly, and you weren't confining yourself just to advice from within the Government. You were going into the private sector, into the international markets, and into the energy companies themselves. But at the end of the day, it comes back to the Minister making a recommendation to his Cabinet colleagues, and the Cabinet making that decision. So, I went through all that process. I was satisfied, by the end of the day, after my visit to the US and getting the advice from the Liquid Fuels Trust Board and the Maiden Committee, that that was the best option available for the Māui gas. So, ultimately, coming back to the question around making a decision in crisis when you've got limited facts, it feels like you want to get as many facts as you can, as widely as you can, given your time constraints, and then just make the best decisions that you can on the day. Absolutely. And my advice to any Minister would be: don't confine the advice you receive just to your officials. I mean, they are an essential part of it, and you could not make good decisions without their advice, because they are looking at the best interests of the Government and their own ministry, and they're restricted by fiscal constraints. But I've always been a private sector supporter. Yes. But I've always been very keen, whatever decisions I'm making, to test the advice that I'm getting from the Government along with advice that I'm getting from the private sector. Yes. Right. Potentially, if you've had the experience in your governance career post-government, in crises there's often enormous pressure to act really quickly. How do effective leaders balance the need for decisive action with the discipline required to avoid reactive or poorly considered decisions? Yeah. Well, the big difference is, of course, one of scale. Yes. I mean, in Government you're dealing with huge numbers; in the private sector you're dealing with a balance sheet, and what is very important, I think, in terms of making decisions, is that you do it within a balance sheet that will support the expenditure that's necessary. I mean, there's no point in actually putting the company at risk by making decisions that impose fiscal costs on it. So, I've always been very keen, both in Government and the private sector, to make sure the debt-to-(debt-plus-assets) ratio[debt to total assets] is something that you can live with. I've always used a figure of about 40% in my private life. I don't get debt of more than 40% of the value of my assets plus debt, and that's given me a fairly strong balance sheet. Some people would say it's a bit lazy, but I think if you go any higher it may be a bit lazy, but I think it's safe thing. Yes. I think “conservative” is a better word than “lazy”. People do use the term “lazy balance sheet”, but yes, I think there's some value in conservatism. Absolutely. Because, as you imply there, it means if anything goes wrong, you still have some ability to go further if you need to. Yeah. I'm a bit like that in my own business. I've got quite a big property business now, which has quite a lot of assets, and my debt-to-(debt-plus-asset value) is well below 40%. But I'm glad about that because I've got a problem with one building, and I'm having a problem selling it, and that always puts a bit of pressure on your fiscal and cash flows, because you're losing the revenue from that building. Yes. But I can manage that because of the - You've got low debt. - low debt, yeah. Yes. You've seen decision-making at the highest levels of Government in this country. What similarities do you see between how a Cabinet makes decisions, how it governs in a crisis in particular, and how a corporate board should make decisions in a crisis? What similarities between Cabinet and corporate? Well, there's some similarity, but not much. Okay. It is a question of scale and advice. The Government's got huge resources available to it in terms of who it can turn to for advice, over and above the officials and the departments. Right. Whereas the private sector is limited. It's really got to make a lot of decisions based on their own experience or their own judgement, and I think you've got to, I think it's always a matter of coming back to good fiscal management, good debt-to-asset ratios, and don't put your balance sheet at risk. Maintain a strong balance sheet. And over and above that, you've got some ability, I think, to spend and invest, but you've got to be sure that you're not going to put your company at risk by making that investment. Absolutely. What practical steps should leaders take to maintain trust while they're making these difficult decisions? Yeah. Well, that one, I mean, the key thing with appointing directors is that you've got people that are transparent, committed, well informed, do their homework, and you can rely on. So, you've got to get those sort of quality people around you. And if you've got those, then you can actually openly and transparently discuss the risks and the rewards and whether something should be done or not to be done, where the risk is too great. How important is it then to communicate outside the boardroom, both within the company, through its leaders, its management, and potentially to other stakeholders, your shareholders and things, through a crisis? Well, I think, in agreeing that you should seek the best possible advice available, you try and identify where that advice is and use it. That could be anywhere in New Zealand; it could be overseas, internationally. Excuse me. What structures or disciplines help Government systems remain stable when the stakes are really high and emotions are running a bit wild? Yeah. Excuse me. One of the things that I learned early in my political life is that you've got to take the public with you, as well as your advisers and your Cabinet colleagues. And to do that, I think you need to engage with them. In other words, in the energy field, you needed to engage with the energy companies and bring them into the equation, and to have their, give them confidence that the Government is addressing the issue, the crisis, and is developing a plan to deal with it, and the plan is supportable. We did that in that energy crisis I spoke about with the Liquid Fuels Trust Board and the Maiden Committee. The public knew that we were getting that, and they knew the plan, what the plan was, to make synthetic petrol. Yes. To use that gas to relieve the energy crisis. My recollection is that it wasn't without criticism. The people of Motunui didn't want the Motunui plant, but that was for environmental reasons, and you can understand that. The Clyde Dam, people in the -Cromwell Region. - Cromwell Valley didn't want their orchards flooded, and you can understand that. But neither did the country want to have a shortage of electricity, so that's the trade-off. Absolutely. Do we trade off some apricots for energy sufficiency? That's the sort of decision Ministers have to make. Yes, absolutely. So, I've taken from that two really strong elements: one is around seeking advice broadly. Yeah. Making sure that you're getting the best advice you can. And two is around having strong planning processes in place. Yeah, and to give people confidence that you're addressing it, and it's viable and supportable. The communication side of it, as well. Yeah. The public are understanding of the Government not being able to solve the crisis immediately, but what they do expect is the crisis to be addressed and a plan to evolve. Absolutely. Yes. What should boards and Governments be doing in normal times to prepare for those unexpected events? Well, I think you need to build in a safety factor in all those dispositions. You've got to say, "Well, that's great if it's all going well, but what happens if this incident arises or that event arises?" It's a bit like your balance sheet and your debt-to-(debt-plus-assets), you've got to have a safety factor, I think. You've got to be able to treat it. And the key to that is having a strong balance sheet. Yes. Having the reserves to be able to spend, if you had to dig into those reserves.

So, two elements again there: 17:02

one around having a strong balance sheet and the other one about thinking about the things that could go wrong. Yeah. And considering, what you would do if they happened? And you'd have them covered if that did happen. Yes. When you look back at leaders who performed well during difficult periods, what personal qualities consistently made the difference in those leaders that were really able to take charge during a crisis? Well, you're talking about qualities of leadership there. That's varied and debatable at times, I think. People are very critical of Muldoon. But Muldoon did have good leadership qualities in that he listened to advice carefully, and he wasn't, he didn't resist taking advice, except in the very last months of his time as Prime Minister, when he didn't like the Labour Government wanting to devalue [the NZ dollar] and that sort of thing. But I found that talking to Muldoon was, sort of, talking to somebody who was absorbing entirely what you're saying. It was quite embarrassing that he was taking it all in. And I admired that. He also supported his Ministers in times of crises. I remember being accused, when I was Minister of Mines, of issuing a gold mine to them, which was all crap, and I took Radio New Zealand [RNZ] to court and won a court case against them. But when I was threatened by the broadcaster to be exposed, I said, “If you run that line, I'm going to sue you.” And I went and told Muldoon that's what I'd said, and he said,“All right. And here's the name of a good barrister, Des Dalgety from Bell Gully. Get DEs in.” Right. And I did, and he was very supportive. The fact that I'd been accused didn't colour his response to me. He supported me. He said, "You keep saying you didn't do it. Well, you didn't do it." Just a little bit more background on that in Sir Bill's biography here of, Minister of Everything [by Brad Tattersfield], which is well worth a read. I'm most of the way through this now. But I take from that the qualities of Sir Robert Muldoon were [1] listening to advice, [2] he took in everything you said and listened, and [3] he supported his team and had your back when something untoward happened. Yeah, those were his qualities, yeah. Yeah. And the public didn't see much of that. And what I've taken again from reading the biography. You were very calm in a crisis. You seem to be a person that is known for being very calm and just getting things done. Yeah. Well, I like to think through how you resolve it. And get on with it. What lessons from past crises would you urge today's corporate directors to remember? What are the lessons that you pick up and say,“These are things that you should consider if a crisis occurs”? Well, I think, firstly, you should become as well informed as possible about what constitutes that crisis. What are the components of the crisis? And what options are there in terms of dealing with it? And certainly, in that process, you want to get the best advice not only from internally in the Government but externally, wherever it's available, and wherever you think it's good-quality advice. Then what is important, I think, in terms of calming the public's concern about it, is to be seen to having a solution to it. You don't need to do it. You just need to be seen to be able to get through it. Yes. Right, right. One final question for you. A general one, just a very broad question. What advice would you give to a new director of a company? Well, firstly, do your homework. Always be well informed. Don't go to a meeting unless you've actually prepared yourself well for the discussions, to be seen to be well briefed on the issues, so to be able to participate and make a contribution. And be a good listener. To be a good listener is a very important aspect of being a good director, I think. To listen to what your colleagues are saying, and to understand, and really try to understand what they're saying. And to have trust. You've got to develop a, it’s a bit like a family, you've got to be able to trust your brothers and sisters. Right. Another thing that I'd take from earlier in the conversation, although this isn't something that you'd step into quite easily, but ensure you've got a strong balance sheet in the company. Keep the company balance sheet strong so that, if a crisis occurs, you've got some resilience against it. Oh, essential, yeah. Good fiscal policy in both the private and public sector. Yes. In other words, in the private sector, cash flow is king. Yes. You can't run a business without good cash flow. Right. Absolutely. And that's often a factor of the strength of your balance sheet. Well, it is. Absolutely. I mean, if you've got high debt, you can't borrow. Yes. Sir Bill, it's been an absolute honour to speak with you. Thank you very much for your time. I look forward to catching up again soon. It's been a privilege to talk to you. Thank you. And we'll see you next episode. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back, and please like, subscribe, and share the videos and podcasts.