‘Not fit for purpose’: Changes recommended after NZR Governance review

A review of New Zealand Rugby governance has found the current New Zealand Rugby Union constitution and consequent governance structures “are not fit for purpose in the modern era.”

Released today, just over a week before the All Blacks kick off their World Cup campaign, the review was undertaken by a four-person panel that included former Fonterra executive David Pilkington, former All Blacks captain Graham Mourie, and experienced directors Anne Urlwin and Whaimutu Dewes.

The panel recommended two key changes:

– The creation of an independent process to ensure the appointment of an appropriately skilled, high-performing board to govern the organisation.

– The creation of a Stakeholder Council to ensure the voices of stakeholders are heard and their interests represented in a collaborative forum. The panel suggested the name Te Kaunihera as reflecting a grouping of many stakeholders who come together to share their wisdom and experiences to benefit the broader rugby ecosystem.

Pilkington, the panel chair, said NZR in the professional era was “a large and complex business.”

“The structure it sits within was not designed for a business of this size and complexity. There is widespread recognition that change is needed to address the many challenges. We are confident that what we propose is the best route forward. The conclusions are not novel, they exist and work in other organisations and environments.

“There have been a number of reviews in recent times and it is this panel’s fervent hope that this is the last review of this type and that walk, finally replaces talk.”

The report said the panel reached its conclusions having consulted with rugby stakeholders and interested parties both in person and through a submission process.

“We have first ensured that all voices of the many stakeholders have been heard. We have travelled the country and listened. We have received and reviewed hundreds of submissions and interviewed nearly 200 people,” Pilkington said.

In a statement, NZR chair Dame Patsy Reddy thanked the panel “for their extensive and detailed report”, as well as those who contributed to the review.

“In December last year, the NZR board commissioned an independent review of our constitution and governance structure, with the aim of ensuring that rugby is best placed for the future.

“NZR received the review today and the Board will now take time to digest it fully. We are committed to considering all recommendations. We will consult with our member unions and stakeholders on their views and next steps to deliver the best possible governance framework for rugby in Aotearoa New Zealand.”

While the review was commissioned and paid for by NZR, it was effectively instigated by the New Zealand Rugby Players’ Association which made it a condition of returning to the negotiating table in mid-2021 when discussions about a proposed private equity deal with US fund manager Silver Lake broke down.

Super Rugby

The report also addressed “difficult matters” that must be addressed to make Super Rugby a viable and commercially attractive competition.

“The early success enjoyed by the competition has not endured. Super Rugby’s relationship to the NPC competition and its pressing financial issues are two of the central issues that must be addressed by the sport,” the report said.

“If Super Rugby is to be a viable, commercially attractive competition that fans will want to re-engage with, difficult matters must be addressed and decisions made, as the current approach of ‘a bet both ways’ is simply not working. But the downstream reality of a commercial approach will not please everyone. The current competition was described to us as a ‘dog’s breakfast’. Fans are unclear on when the competition will start, which players are available and how they should relate to both Super Rugby and NPC. Super Rugby is in danger of becoming a television-only experience because the fans have not been put front and centre.”

The impact of professionalism

The report found many of the challenges facing rugby in New Zealand were connected with its professionalisation and has created the need for greater commercialisation to deliver the revenue needed to support it.

“Private equity investors have been attracted to rugby for the opportunities they perceive to further develop the economic value of the sport. The money NZR has obtained from one of these investors, Silver Lake, has been readily accepted and there is no retreat from the professional era. But the professional game and the entry of private investors demand a matching standard of governance. The initiation of this review is explicit acknowledgement that this is not yet in place, nor the need fully recognised.

“Player power is here to stay, and a more nuanced, mutually beneficial relationship between players and administrators is needed. This is evident to some degree at the operational level but not yet across governance. Conflict, especially when played out in public, is diversionary and destructive.

“Six New Zealand-based Super clubs (counting Moana Pasifika) and 14 NPC teams in a country of five million people is not working financially. On average, 59% of the NPC Unions’ expenditure is on high performance, arguably at the expense of game development. Both competitions face rising costs and have seen drastic falls in game revenue. For the Provincial Unions, the gap has been filled by money flowing from the centre.”

The women’s game

The report said it was “unclear if everyone is on board with developing the women’s game.” That’s despite the most recent World Cup win in November 2022 launching the women’s game into public consciousness.

NZR responded with a detailed 10-year strategy and solid vestment in the current year of $21 million. There were 24,447 women players in 2022, 17.8 per cent of the total.

“The women’s game has its own set of challenges, and some were concerned that this is not reflected in the approach being taken: Still old thinking being applied to the women’s competition; What has made men’s rugby successful is not necessarily transferrable.

“It was suggested that the key consideration needs to be what the home life of the players looks like. The women’s game is family-based; the simple question of access for prams, for example, was cited. The game is different: different audience, different experience, different after-match culture … There must be structures and support networks different to the men’s game in order to develop the women’s game.”

‘On-field professionalism, but off-field amateurism’

The panel received complaints about how the process was “manipulated” in the last cycle to enable NZR, against the inclination of some of its members, to meet the Government’s required 40 per cent female membership target on the boards of funded sports and recreation organisations.

“We further note that the need to do that is entirely a consequence of the current board composition and the channels to election or appointment.”

No consensus on competencies

The report found there was a lack of understanding of the competencies the NZR board needs post-Silver Lake.

“The NZR board needs directors with skills, knowledge and experience relevant to the level its challenges demand,” it said. “However, many of those who spoke with us from the perspective of provincial union affiliations are convinced the formation of the New Zealand Rugby Commercial (NZRC) subsidiary means that the NZR board can now, in a sense, be ‘slimmed down’ and make a fundamental shift to being a more ‘PU-oriented’ or ‘rugby’ board. One, it seems, that would be drawn largely from current and past Provincial Union directors. In our view, this would be highly irresponsible.”

“The assumption that ‘non-rugby’ matters have been transferred to NZRC reveals a fundamental misunderstanding of the structure and process of corporate governance in the organisation. While legally structured as a limited partnership, NZRC is a subsidiary of NZR. As the ‘parent’ entity, NZR remains accountable for the performance of its commercial offspring and signs off on many of its important decisions. NZRC is no more than a tool for NZR to use to achieve certain objectives. NZRC is not independent. Its strategy is a subset of, and a way to achieve, the NZR strategy.

“For that reason, the NZR board continues to need directors who are competent to oversee the relationship, provide strategic input, ensure that the subsidiary performs as required, and manage the challenges and risks accompanying the partnership with private equity and, perhaps ultimately, other external investors.”

Luke Kirkness is an Online Sports Editor for the NZ Herald. He previously covered consumer affairs for the Herald and was an assistant news director in the Bay of Plenty. He won Student Journalist of the Year in 2019.