Abstract
The economic and political empowerment of Indigenous people are linked although the issue of economic empowerment is often overlooked. This Brief analyses the corporate governance model and business structures used by Māori in New Zealand along with some developments in Canadian Indigenous businesses. Based on this, the Brief makes suggestions for proving the regulatory support and options available for Indigenous businesses in Australia.
The economic and political empowerment of Indigenous people are linked although the issue of economic empowerment is often overlooked. A recent Canadian Bar Association article quoted the Chief of the Membertou First Nation saying ‘you first have to play the game. You have to play to win, and we won’. 1 He was referring to the purchase (in partnership with Premium Brands Holdings Corp) of Clearwater Seafoods Inc by the Membertou and a coalition of First Nations for CAD 1 billion. 2 The news article points out that First Nations making plays for big revenue-generating properties has been a growing trend in Canada and one that is important for the economic empowerment of First Nations people. 3
This sentiment of economic empowerment being important is echoed in Australia by Marina Nehme in a book chapter where she argues that the Australian system of incorporation for Indigenous people under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) is not ideal because it is heavily reliant on Western values. 4 Despite many rules within the CATSI Act being replaceable, meaning that more appropriate rules can be adopted in their place in the company constitution, some of the mandatory rules (like those dealing with quorum requirements for meetings) may be contrary to Indigenous customs. 5 The recent review of the CATSI Act conducted by the National Indigenous Australians Agency also discusses submissions which raised concerns about the need for more flexibility. 6 Most significantly, it has been noted that management structures under the CATSI Act might be problematic because the board of directors may make decisions that are contrary to the majority of the members. 7 Although this is also a replaceable rule, a modification would need to be approved by the Office of the Registrar of Indigenous Corporations (ORIC) and it has therefore been argued that the degree of flexibility is tempered by the requirement of such approval. 8
In the face of these arguments about CATSI Act not providing enough flexibility to accommodate Indigenous values and culture, this Brief provides the example of New Zealand where the mainstream legislation regulating companies, the Companies Act 1993 has been successfully leveraged by Māori entities.
The company within Māori entities
The Treaty of Waitangi, concluded in 1840 between the British Crown and most of the Māori Chiefs in New Zealand, eventually gave rise to the establishment of the Waitangi Tribunal in 1975 to settle Māori grievances. 9 Over NZD 1.5 billion worth of assets have been allocated to Māori under the Treaty settlements resulting in a thriving Māori economy in various sectors – fisheries, forestry, agriculture or property assets, tourism, education and even digital technology. 10 The Office of Treaty Settlements (OTS), responsible for managing the negotiation and settlement process, requires the establishment of governance entities to receive and manage the Treaty proceeds. 11 These requirements have resulted in Māori entities taking on complex structures with different business forms employed for treaty settlement proceeds and more operational needs. 12 The OTS is available to discuss the choice of governance entity in the early stages of the settlement process. 13 However, policies of the OTS have been perceived by Māori as being contrary to tikanga (Māori values, culture, practices). 14 The major law firms in New Zealand have Māori business practices and much of the complex structuring has developed as a result of their advice.
The most common structure is that of a group of entities where a company (or a number of companies) conduct commercial activities for the group and then pass on the profits created to a private trust (usually the sole shareholder of the company or companies) which then distributes it to the tribe. 15 This popularity of the corporate form in the Māori economy shows that companies can offer the same advantages to Indigenous people as they do to most of the Western world. Features such as limited liability, separate legal personality, perpetual succession, free transferability of shares, and the separation of ownership and control are responsible for the popularity of the business form across the world. 16 The next section discusses how the corporate form is reconciled with Māori culture and values within these business groups.
Māori corporate governance
There has been much criticism of the existing paradigm of corporate law which is underpinned by the shareholder primacy theory according to which shareholder interests must be prioritised. The alternative theory, stakeholderism, has received a lot of interest over time. However, stakeholderism runs into the problem of not setting out a way to balance the interests of various stakeholders. In other words, when the interests of different classes of stakeholders (for instance employees and that of the community) are contrary to one another, it is not clear which of their interests should be prioritised. Proponents of the two theories tend to find common ground in the long-term shareholder interests view according to which interests of various stakeholders are taken into consideration because they will benefit the company in the long run. At first glance, Māori corporate governance might be viewed in this long-term shareholder lens because it seems to find a middle ground between the two competing theories. However, a closer examination of Māori business entities reveals that the complex structuring holds the key to the balancing act. Before examining the business structures employed, it is useful to understand the principles of tikanga in influencing Māori businesses.
Julie Cassidy outlines some principles of tikanga and discusses them under the ideas of social responsibility, sustainability and culture. 17 Under sustainability she mentions kaitiakitanga (stewardship and protection (of natural resources)) and utu (reciprocity, to promote a balance between people and the environment) as relevant tikanga principles. Under social responsibility, the relevant tikanga principles she discusses are manaakitanga (sharing and hospitality), aroha (charity and generosity) and tau utuutu (reciprocity). These principles may correspond to ideas of charitable donations in corporate social responsibility literature but extend beyond that idea because the principles also signify the company’s reciprocity with members of the society and future generations. With respect to culture, Cassidy outlines the tikanga principles of taonga tuku iho (recognising and maintaining treasures and knowledge passed on from ancestors), iwitanga (celebration of unique and shared qualities of iwi or hapu), mana (political power and, underpinning the same, customary law) and wairuatanga (spirituality). 18 These are ideas that are often absent even in discussions of stakeholderism. Linda Te Aho adds two fundamental concepts to this list – whanaungatanga (relationships of people to their environment, their history and each other) and mauri (vitality, mana and fruitfulness of people, lands, forests and other natural resources). 19 Thus, respect for the environment and community is writ large in tikanga.
This leads us to question how these principles are balanced against the goal of wealth maximisation. The Māori economy generates sizable profits while also following tikanga. The fact that the company is used as the profit-making arm and the trust manages the distribution of profits undercuts any clash between the two competing theories of shareholder primacy and stakeholderism. The sole shareholder being the trust means that all profits may be passed on to the trust and the distribution of profits from the trust is in accordance with tikanga. Thus, there is both charitable purpose and profit purpose embedded within the group.
Yet the companies under these groups are also expected to follow tikanga. Linda Te Aho notes that there is sometimes an expectation gap where the community wants the directors to act according to tikanga while the directors do not always do this satisfactorily. She suggests that the adoption of a provision within the constitution of these companies, requiring directors to manage the company according to tikanga, as a solution to this expectation gap. 20
In practice, companies have used the constitution to suit their needs in other ways. Ngati Porou Holding Company Limited, the commercial arm of Ngati Porou Group, states in its constitution that it will conduct commercial activities of the Ngati Porou Group ‘solely for the benefit of’ the beneficiaries of the Toitu Ngati Porou Charitable Trust in the furtherance of the purposes of the trust. 21 Rather than adopting a constitution provision regarding the applicability of tikanga, the Ngai Tahu Holdings Corporation Ltd (one of the profitable Māori companies) modifies some of the replaceable rules within the Companies Act 1993. For example, it provides that directors’ management powers are subject to a requirement to ‘have particular regard to any statement of strategic intent, policy, principles, guidelines or recommendations’ of the Ngai Tahu Charitable Trust which is the sole shareholder of the Ngai Tahu Holdings Corporation Ltd. 22 These bespoke constitutional provisions are consistent with the positive commentary in Australia about the provisions of the CATSI Act which allow flexibility, and criticism regarding the lack of flexibility in some other provisions. 23
Apart from any such constitutional deviations from the default position, the companies within the Māori business groups are run like any others, with the board often consisting of a diverse and professional group. Thus, the corporate form, with its inbuilt flexibility allowing default rules to be replaced by more suitable rules via the constitution can be a useful tool for Indigenous corporations.
Although the lack of flexibility in the CATSI Act has been criticised, it offers support resources through the ORIC and funding from the Indigenous Advancement Strategy to corporations set up under it. 24 This is probably the reason for CATSI Act incorporations to be popular among Indigenous entrepreneurs. 25 It is useful for the support infrastructure to be extended to Indigenous entrepreneurs who prefer to incorporate a corporation under the Corporations Act 2001 rather than the CATSI Act to ensure that they are able to leverage the benefits of the corporate form. Bespoke constitutional provisions may be designed, as the Māori companies have done, to ensure cultural values are followed. The use of trusts (as the sole shareholder of the company) for distribution of profits to all members is another useful idea that may be imported from Māori business structures.
Apart from offering flexibility, which the CATSI Act might not always provide, the above suggestions could also help Indigenous corporations do business together with mainstream corporations, as has been happening in recent times in Canada. 26
Conclusion
The use of the corporate form by Māori business groups in New Zealand may offer a model for other countries like Australia, that are seeking to economically empower Indigenous people. While the ORIC in Australia performs useful functions including corporate governance training, it may be worth considering whether the general corporate form with its inherent flexibility may be a useful option for Indigenous businesses. This Brief has provided suggestions to combine the support that Indigenous entrepreneurs receive under the CATSI Act with that of the mainstream corporate form based on the model of Māori business groups in New Zealand and emerging trends in Canada. It is important that Indigenous peoples’ economic potential is developed and, to that end, lessons from and developments in different jurisdictions should be taken on board.
Footnotes
Acknowledgment
The author would like to thank the anonymous reviewer and editors for useful comments and suggestions.
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
1
2
Ibid.
3
Ibid.
4
Marina Nehme, ‘Indigenous Corporate Governance in Australia and Beyond’ in David A Frenkel (ed), Economy and Commercial Law: Selected Issues (Athens Institute for Education and Research, 2013).
5
Marina Nehme and John Juriansz, 'The Evolution of Indigenous Corporations: Where to Now?' (2012) 33(1) Adelaide Law Review 101, 132–3.
6
National Indigenous Australians Agency, Final report: CATSI Act Review (30 October 2020) 33.
7
Nehme and Juriansz (n 5) 134.
8
Ibid 134.
9
Treaty of Waitangi Act 1975.
10
Elizabeth Macpherson, ‘Iwi Companies’ in Susan Watson and Lynne Taylor (eds), Corporate Law in New Zealand (Thomson Reuters, 2018) 115, 116.
11
Ibid 116.
12
Ibid 116.
13
Ibid 117.
14
Ibid 118. For a detailed discussion on tikanga see Law Commission, Māori Custom and Values in New Zealand Law (NZCLC SP9, 2001) at 26 – 48.
15
Linda Te Aho, ‘Corporate Governance: Balancing Tikanga Māori with Commercial Objectives’ (2005) 8(2) Yearbook of New Zealand Jurisprudence 300.
16
Macpherson (n 10) 119.
17
Julie Cassidy, ‘“Frankenstein Incorporated” v Social Citizen: Learning from Māori Tikanga in Framing New Zealand Corporate Governance Principles’ in Robert Joseph and Richard Benton (eds), Māori Corporate Governance (Thomson Reuters, forthcoming).
18
Ibid.
19
Te Aho (n 15).
20
Ibid.
21
Section 5 of the Ngati Porou Holding Company Limited Constitution.
22
Macpherson (n 10) 121.
23
Nehme and Juriansz (n 5); National Indigenous Australians Agency (n 6).
24
25
Ibid.
26
Beazley (n 1).