Lawyers urged to vote down NZLS plans to restructure board

This is a submission to council of the New Zealand Law Society about an October 2023 consultation document on constitutional change.

• I oppose the proposed changes which will only make worse what is already an unsatisfactory governance structure. The proposals further centralise power in a board appointed by a convoluted procedure whose members are not directly accountable or responsible to the membership.
• I propose that the proposals in the document be abandoned and that, instead, the society’s governance structure be changed to make it more responsive to its members.
• On the second page after the cover page (the document’s pages are not numbered), the document claims that in making the recommendations, the board and council considered “best practice for boards in New Zealand,” amongst other things.
• I have had extensive board governance experience, having been first a trustee, then Deputy-Governor of the Auckland Savings Bank (which became the ASB in 1986), and then chairman of the board of the ASB’s successor, ASB Bank Limited, from 1988 until 2011, chairman or member of boards of various companies associated with ASB and of audit and risk committees, chairman of Ports of Auckland Ltd (2006- 2009), and member of the Apec Business Advisory Council (ABAC) from 2009-2012. During my ABAC membership, I participated in a large number of symposiums, conferences and training sessions around the Asia-Pacific region. I chaired or otherwise led or was a trainer or speaker at many of these. A number of them, or aspects of them, concerned corporate governance.
• I do not consider that the New Zealand Law Society has a best-practice governance structure. The proposed changes make a bad governance structure worse.

Best practice governance structure

• To ascertain what may be best practice for a membership organisation which has a lawful purpose other than for the financial gain of any of its members, it is appropriate to examine general legislation designed for such organisations. New Zealand now has modern incorporated society legislation, the Incorporated Societies Act 2022, although it is yet to come into force. Section 3 sets out the purposes of the Act which include providing a legislative framework that promotes high-quality governance of societies and recognition of principles which include that societies have members “who have the primary responsibility for holding the society to account” and that societies “should operate in a manner that promotes the trust and confidence of their members”.

Section 84 requires societies to call an annual general meeting of members. The intention is for incorporated societies to have governance structures whereby the governors are responsible and accountable to members. What the Act requires or envisages in this respect is best practice for societies.

NZLS’ structure does not accord with best practice

• As the New Zealand Law Society is a membership organisation carried on for lawful purposes other than the financial gain of any of its members, the 2022 Act would be the vehicle for incorporation of New Zealand’s lawyers if the society did not have its own Act. The 2022 Act’s provisions set out above indicate aspects of best practice for an organisation like NZLS. They indicate that the governance structure should be fit for the purpose of holding the society’s administrators to account because that is the way the society is held to account. It is done in two main ways: election of officers by the membership and an annual meeting of members. The NZLS constitution provides for neither.
• Accordingly, the society’s governance structures do not conform with best practice. The claims in the consultation document that the proposed changes accord with best practice are specious. They simply exacerbate existing deficiencies.
• The structure established when the society was created in 1869 would be best practice today and, no doubt, was considered so in 1869.

Section 9 provided: And for the better rule and government of the society and for the better direction and management of the concerns thereof there shall be a council of the society to be elected from among such of the members as shall be barristers or solicitors practising in New Zealand and a President and Vice-President of the society shall be elected from the council and such council including the President and Vice-PresIdent shall consist of not more than fifteen nor less than than nine.

• In the decades which followed, the structure was changed to provide for district law societies, of which district lawyers were members, who exercised disciplinary and other powers and functions. With the passing of the 2006 Act, the district law societies were scrapped and the NZLS once again became the sole governing body. The 2006 legislation left it to the council to adopt a constitution, but in preparing it the then council failed to adhere to best practice regarding responsibility and accountability. With the re-establishment of a national organisation, it would have been better for the society to have learnt from the 1869 Act. It displayed what was required for “the better rule and government of the society and for the better direction and management of the concerns thereof”.
• The mechanism for adopting and changing the constitution is itself an example of thoroughly bad practice. The 2022 Act requires every amendment to be approved at a general meeting of the society passed by a simple or higher majority (s 30). That’s the way it should be for the law society. Instead, clause 6.3 provides, “The council may amend or replace this constitution in such manner as the council determines, subject only to the provisions of the Act.”

Conclusion

• The council should not adopt the proposed changes. It should: amend the constitution to require amendments to be approved by a majority of the membership, with provision for the members to vote using electronic means; establish a working group to draft a new constitution which restructures the structure and procedures of the society using the requirements of the 2022 Act as a guide; and put the draft replacement constitution to the members for their approval.
• I would be prepared to serve on that working group.
• I request that this submission be circulated by the society to the members to enable members to consider it along with the consultation document and to indicate whether they support my proposals.

See also Lawyers urged to have their say on proposed NZLS board changes.