A former director of Team New Zealand has raised questions about the governance of the syndicate, claiming chief executive Grant Dalton “is accountable to no one but himself”.
Dr Jim Farmer, a leading Queen’s Counsel, believes Team New Zealand’s structure is outside the norms of good corporate governance. He has described Dalton as a “control freak”.
Greg Horton, a senior corporate lawyer who sits on Team New Zealand’s board said he was happy with its governance and processes and fired back at Farmer.
“Grant knows how to win, and takes no prisoners. He makes no apology for that, nor does the board. Winning counts,” Horton said.
“Mr Farmer may have the view that Grant is unchecked and unconstrained by the Board, but that is simply not correct. Whether that was the case during Mr Farmer’s tenure as a director, I cannot comment.”
Dalton is both chief executive of the syndicate as well as acting chairman, a position he has held since Warehouse founder Sir Stephen Tindall resigned from the board in June.
Dalton is also one of only two trustees on the charitable trust that owns Team New Zealand. The other is Horton, a senior corporate lawyer who is battling motor neuron disease.
In the days leading up to Team New Zealand’s announcement that it was postponing the announcement of the venue for the next America’s Cup on September 17, the syndicate has been fending off advances from wealthy businessman Mark Dunphy.
Dalton responded by saying unless the team knew where the money was coming from it could not accept it “from a straight governance point of view”.
In a post on his blog, Farmer, who spent almost a decade on the board of Team New Zealand from 2003 to 2014, said he was not sure the syndicate was in a position to raise questions about corporate governance.
“In conventional company law and governance terms, the CEO is accountable to the board, the board is accountable to the shareholders, ” Farmer wrote.
He told the Herald that these controls did not appear to be in place for Team New Zealand. “Basically, he [Dalton] is accountable to no one but himself.”
Farmer said Dalton’s position gave him powers such as to call board meetings, which in his experience, he did not seem to like to do.
“In my time, when I was on the board of Team New Zealand, he [Dalton] always had to be pushed to call board meetings. He didn’t really like board meetings, as a concept.”
Typically a chair was an important role separate to the chief executive, providing day-to-day checks.
“If you’ve got the same person being the chair and the CEO, well, you don’t get that. They’re consulting with themselves.”
Dalton’s role as one of only two trustees gave added control, as it was trustees who could vote out directors, but even if the other trustee disagreed with him,
“The fact is, you’ve got Grant as one of two trustees. If the other trustee thought that the board wasn’t doing things properly, or the CEO wasn’t doing properly, or say just Grant wasn’t doing things properly, what can he do about it? Because he’s got no majority position as one of two trustees, holding the shares,” Farmer said.
“In the structure, there’s no room for governance, at all.”
In Farmer’s view, this could be of concern to a Government or any other entity if it was to put money towards the next America’s Cup event.
“If you’re investing the money, not as a shareholder, not as a lender, but you’re putting money into this entity for a particular purpose, you want to make sure it’s actually spent on that purpose, in accordance with whatever guidelines that may be put down.”
Dunphy alluded to similar concerns in letters to Team New Zealand and the Royal New Zealand Yacht Squadron earlier this month.
“It would have been preferable for independent parties to have been appointed as trustees when Sir Stephen Tindall retired as trustee of the Team New Zealand Charitable Trust,” Dunphy wrote on September 16.
“Good governance principles require a clear separation between the governance of the Charitable Trust and the governance of Team New Zealand Limited. One expects this issue will be resolved through this process.”
A governance adviser approached to discuss Team New Zealand’s corporate structure said he did not believe it would provide the checks and accountabilities needed.
“It’s hard to see how you could provide effective oversight and accountability. You’ve got a chief executive reporting to a board, that he leads, which in turn is accountable to a trust that he is trustee of,” Richard Westlake, the managing director of Westlake Governance, told the Herald.
“The risk is you’re not going to get the type of challenging and the testing of the thinking and decision-making that you need from a board.”
‘Satisfied with our governance and processes’
This week Team New Zealand released the correspondence it has shared with Dunphy since the oilman made public his interest in supporting an Auckland campaign.
While the letters and emails quickly become tense (Dunphy having publicly stated Dalton needed to step down] an early email sees Dalton provide a polite account of the team’s dynamics, revealing Team New Zealand’s board discussed when Tindall resigned whether new board members were needed.
“The conclusion was that we act as a very cohesive unit, we all totally understand the Cup and we do not need anyone else, it worked and works just fine – 3 [Louis Vuitton Cup] wins and 2 [America’s Cup] wins would indicate we are doing something right!”
In a statement, Team New Zealand director Greg Horton, who has been on the board for most of the period since 2014, defended the current governance.
“While I have the greatest respect for Jim Farmer QC as a fellow legal professional, he knows nothing about the governance arrangements at Team New Zealand, either currently or during the last two successful America’s Cup campaigns.”
During the 2017 Bermuda campaign and the successful defence of the America’s Cup in March the campaigns were led by Tindall “with formal board meetings and very regular interactions between directors and management,” Horton said.
“As we work towards another successful campaign, which is and will always be our focus, as directors we are all intimately involved on a daily basis.And I mean literally on a daily basis.
“As a director, I am satisfied with our governance and governance processes – both now and during the last two campaigns.”
‘Grant knows how to win’
“Mr Farmer may wish to describe Grant as a control freak, and he may well be in some people’s eyes, but I would point out that under his strong leadership and unwavering tenacity we have won the last two Americas Cups. Grant knows how to win, and takes no prisoners. He makes no apology for that, nor does the Board. Winning counts,” Horton said.
Horton said Dunphy – like Dalton – was both chairman and chief executive of Greymouth Petroleum. “We make no apology for that, as presumably Mr Dunphy does not in his own private company.”
Horton also described Dunphy as a “close associate” of Farmer. Team New Zealand had earlier said Farmer “represented” Dunphy, something Farmer denied.
While he represented Greymouth Petroleum in a case against Energy Minister Megan Woods in 2020, and acknowledged he speaks to the entrepreneur frequently, he was not representing him now.
“He doesn’t want me to act for him so he doesn’t have to pay me,” Farmer said.
“I’m doing this solely as a yachtie, because I have my own racing yacht. As a member of the squadron, and as a former Team New Zealand director,” Farmer said.
‘Flogging a dead horse’
Dunphy’s correspondence shows he consistently attempts to correspond with former Toyota New Zealand chairman Bob Field and Royal New Zealand Yacht Squadron commodore Aaron Young.
In an interview with the Herald on September 17, Dunphy urged the RNZYS to take the lead on talks.
“We’re all looking for the squadron to be a leader here. I don’t just mean all of us in New Zealand, I think the international community, the international sailing community, is too. I don’t doubt the New York Yacht Club as the original trustee of the cup is looking closely for a whole variety of reasons. They want to come down here, I understand, and compete.”
In response, Dalton demanded that he alone be the named contact, adding Young had indicated he had no part in the negotiations. At one point, Field corrects Dunphy’s description of him, pointing out that he is not, nor has he ever been, chairman of Team New Zealand.
Horton said the board of Team New Zealand had indicated the negotiations should be “between Grant and Mr Dunphy” adding that the letter had asked a series of simple questions, but had not received answers.
“Mr Dunphy’s correspondence proposes considerably more government investment, which the government has said it will not do, so Mr Dunphy appears to be flogging the proverbial dead horse.”
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