Companies are commercial organisations that generally try to make a profit. Owners are called shareholders. Companies are recognised as legal entities distinct from their owners. Public companies are those whose shares can be bought and sold by anyone and are required by law to publish their financial positions. Private companies do not have to publish financial information; their shares are held by fewer individuals and cannot be traded.
Large companies require large amounts of capital. Statistics New Zealand defines large firms as those employing more than 50 full-time employees. The Financial Reporting Act 1993 defined a large company as one that satisfied at least two of these criteria:
New Zealand inherited British company law with minor adaptations. That law was changing at the time of European settlement. The most important development was limited liability. Shareholders undertook to take a fixed maximum share of the ownership of a company and they were not liable for the debts of the company beyond that maximum.
Limited liability enabled companies to draw on a wider array of potential investors and larger amounts of capital. Limited liability was adopted gradually. Shareholders seldom paid all of their investment immediately. The money they withheld, their ‘reserve liability’ gave them an incentive to monitor the behaviour of the company to ensure it was up to the mark.
As gold mining progressed from alluvial gold in the 1860s to underground mining and crushing ore from the 1890s, it became capital-intensive. The amount of gold in the ore – always low – could become so small as to make crushing unprofitable. A specific ‘no liability’ company evolved. Shareholders bought shares of a given value but only paid a fraction of that initially. As work proceeded and more capital was needed, further calls were made. Shareholders could make their own assessment of the value of investing further and decline liability for the additional call – at the cost of sacrificing their shares.
The vast majority of 19th-century and early 20th-century New Zealand enterprises were either sole proprietors or partnerships. The risk with these operations was that people’s personal assets could be seized by creditors should they go bankrupt. A company structure offered protection against this, and facilitated raising greater amounts of capital.
The most common method to expand a business (apart from reinvesting profits) was to take in other parties. In exchange for their capital (money) investors received an interest in the company (shares). Publicly listed companies slowly became more common after the Joint Stock Companies Act 1860 was passed. This was especially true with gold mines – one third of the companies floated between 1860 and 1900 were gold-mining companies. However the capital raised was paltry. As a small underdeveloped country reliant on overseas capital, local capital was in short supply. But gaining access to capital was crucial for companies wanting to grow.
The New Zealand Company was the first large company to operate in New Zealand. It was set up in London in 1839 with a paid up capital of £100,000 in £100 shares. Dividends to shareholders were to come from selling to colonists land bought from Māori on easy terms. The company promoted colonisation, but by 1845 was £60,000 in debt. In 1850 the British government paid it £268,000 for its landholdings, and this was used to pay out shareholders. The company was dissolved in 1858.
Commercial ventures established from the 1840s were mainly traders, importers and retailers. Many remained small-scale operations, but some would grow into major New Zealand companies. David Nathan opened a small merchant store in Auckland in 1841. The city grew rapidly, and he diversified working as a shipping agent, tea importer and kauri-gum exporter.
The scale of early enterprise did not often warrant the trouble or expense of registration of companies in London. Early entrepreneurs such as John Logan Campbell, Thomas Henderson, David Nathan and Thomas Russell all conducted their initial enterprise on an unincorporated basis.
From the 1840s until the 1870s the great opportunities for business growth lay in importing goods the new migrants required. Drapery, tea and sugar were dominant imports. The demand for drapery allowed the growth of firms such as DIC (Drapery and General Importing Company), Sargood, Son and Ewen in Dunedin, and Levin and Company in Wellington.
A burgeoning population created strong demand and factories producing goods such as shoes and boots began to compete with importers. Companies such as clothing manufacturer and chain store retailer Hallensteins (founded in 1863) grew quickly as the population grew. By 1900 it had 36 branches. Another example was Wellington ironmongery E. W. Mills, established in 1856, which had over 120 staff by 1871.
From the 1880s the economy changed from one dominated by imports to one based on exporting. Yet this did not give rise to large companies. If anything it had the opposite effect. There were only a few large companies involved in 19th-century New Zealand farming. A key company was the New Zealand and Australian Land Company, which had large landholdings but, more crucially, was a pioneer in refrigerated shipping. This generated intensive dairy farming and raising lambs for frozen meat from the 1880s. Refrigerated shipping allowed the rise of the owner-operator (family) farm, with small workforces as the basic unit of production.
A unique feature of agricultural processing especially in the dairy industry was the cooperative structure of companies. Cooperatives were owned by farmers who were paid through the price of their milk. Dairy farmers had no choice but to use the services of factories for processing their milk into butter and cheese.
Meat freezing involved both cooperatives and standard shareholder-owned companies. The first freezing works established in the 1880s were owned by farmer cooperatives. After 1900 they were increasingly owned by British meat importing firms. The most important of these were Vestey, and Thomas Borthwick and Sons. Sheep farmers could sell their sheep to processors or they could retain ownership, pay a fee for processing and for transport, and sell their own (identified) produce in an overseas market. As farmers had options, large companies – even overseas-owned ones – could not dominate the market.
In the 1800s and well into the early 1900s most industries were characterised by many small firms. Large, vertically-integrated operations were the exception to the rule. They tended to occur in industries with large capital requirements. For example Ross and Glendining was a textile manufacturer that arose over the 1880s and 1890s in Dunedin. It exploited the early supply of wool. By 1900 it employed 1,000 people which would have made it the largest manufacturing company in the country. By this time it owned sheep runs, wool sorting and scouring operations, a coal mine, woollen and worsted mills, and hosiery and clothing factories. Its distribution network included an office in London and branch warehouses in major New Zealand cities.
Other major companies of the late 1800s were the New Zealand Sugar Company, Auckland Gas, the New Zealand Frozen Meat Company and the Northern Steamship Company – all of which had capital ranging from £150,000 to £300,000 ($25–50 million in 2009 terms).
Companies with access to capital could grow. They generally fell into three categories. The first was companies who through location or family connections had access to investors. For example the Mosgiel Woollen Factory Company which grew in the 1870s had connections to wealthy Dunedin families.
The second category was companies that promised to be large enough to attract the attention of domestic promoters. For example the Kauri Timber Company (the largest of the colonially floated companies of the 1880s) grew out of many existing firms. Company promoters were attracted to the timber and sawmilling industry by the profitability of the Union Sash Company, which had formed in the 1870s.
The third category was companies who, owing to the nature of their business, were able to attract foreign capital. For example the Union Steam Ship Company took off once it attracted Scottish capital in the 1870s – helped out by the fact that it bought its ships (with a mix of cash and shares) from one of the Scottish investors. Companies who were in situations or industries that could not attract capital struggled to grow.
In the early 2000s companies such as Telecom and Fletchers were household names. A century earlier the Mosgiel Woollen Factory, the Kauri Timber Company, Union Steam Ship, the Waihi Goldmining Company and Christchurch Meat were similarly all household names.
Shipping companies had large capital requirements. The New Zealand Shipping Company registered in Christchurch in 1873 with a nominal capital of £250,000 ($30 million in 2009 terms). The need to buy ships soon saw it looking to Britain for further capital, a pattern of development mirrored by the Union Steam Ship Company which began in Dunedin in 1875 as a coastal shipping company. With a capital injection from Britain it rapidly expanded into the trans-Tasman trade. It was bought by P & O in 1917. For about half of its existence the Union Steam Ship Company was the largest private employer in the country. As late as 1972 it had over 3,000 employees.
Most of New Zealand’s early large companies were involved in providing financial services. Overseas banks included the Bank of New South Wales, the Union Bank of Australia, the National Bank of New Zealand and the Bank of Australasia. There were also two significant local banks, the Colonial Bank with 20 branches, and the Bank of New Zealand (established in 1861) which had over 100 branches. In the late 1800s each of these banks had capitalisations of more than £1 million (over $170 million in 2009 terms).
Agents of stock and station companies were often very familiar with their rural clients. Agents became ‘a man’s man, a ladies man, a model husband, a fatherly father, a good provider, a Nationalist, a staunch Labour man, a Social Credit disciple, a Catholic, a technician, a politician, a mathematician, an all-round mechanic and, on occasion, a Communist.’1
Other significant financial institutions included stock and station agents and insurance companies. Most stock and stations agents were provincial, but two – Dalgetys and Wright Stephenson – operated on a national basis. Dalgetys, the National Mortgage Agency (established in 1864) and the New Zealand Loan and Mercantile Agency (founded in 1865) were all British-owned. They provided funds for land development. Wright Stephenson (established in 1861) was the most important of the New Zealand-owned firms. It has been headed by a number of key business figures – William Hunt, Clifford Plimmer and Ron Trotter. New Zealand Insurance (established in 1859) and South British Insurance (established in 1872) were large companies operating out of Auckland. By 1961 New Zealand Insurance was first, and South British Insurance third, in terms of market capitalisation on the stock exchange. The two companies merged in 1981.
In 1891 New Zealand had 102 breweries. Poor transport meant that high-bulk low-value products like beer were confined to local or regional markets. Some larger breweries did exist in the major metropolitan markets – Dunedin had Speights, Wellington had McCarthys, and Auckland had Campbell, Ehrenfried, Great Northern and Hancocks.
In the late 1800s it was difficult to transport goods between cities, and costs were high. Small- to medium-scale factories arose in each of the main settlements, rather than one or two large factories serving the whole country. In 1911 there were 433 private companies in New Zealand and 566 public companies. Few of these companies were large, and many operated in the same industries – just in different cities.
Breweries were often linked to importers, providing alcoholic liquors as well as New Zealand-made beer. Each urban area had its own breweries. This regional pattern remained in many industries, including coachbuilding, baking and newspapers, up until the 1920s. From the 1920s many industries followed a pattern of acquisitions and mergers, and small entrepreneurial firms grew into large ones trading in all parts of the country. It was only in 1923 that New Zealand Breweries, incorporating the 10 largest breweries, formed. Auckland-based Dominion Breweries emerged as the other major player in the 1930s.
Large companies that serviced New Zealand consumers often processed imports, and company ownership was shared by overseas suppliers. Many banks, financial institutions and shipping companies were owned overseas. Local competitors (whether government or private sector) provided a check so that large overseas companies could not monopolise the market. Railways were almost entirely owned by the government.
In the 19th century many large companies grew because it was cheaper to import materials and add some finishing process in New Zealand than to import finished products. A motor vehicle assembly industry grew from the 1920s on the basis of adding some local materials to imported vehicle bodies and engines. Some companies involved, such as the Todd Corporation and Colonial Motor Company, also provided imported petrol, and grew into large companies. Large foreign investors such as Ford and the British Motor Corporation also competed. Tariffs favoured British imports from the early 1930s, and after 1938 import licensing gave preference to material and equipment over finished products. Large companies grew in the New Zealand manufacturing sector, for example Lever Brothers and Colgate Palmolive, which made toiletries.
Import licensing and supporting local manufacturing was promoted by the government in the late 1930s. Many large companies were subsidiaries of overseas companies. Companies that had previously supplied imports started manufacturing or assembling in New Zealand. They continued to supply the market, but with materials rather than finished products.
Foreign investment was also promoted. For example in the late 1950s the government offered cheap electricity from the Manapōuri power scheme as an incentive for Comalco to build an aluminum smelter at Tīwai Point in Southland. Similarly during the 1950s Tasman Pulp and Paper depended on the expertise of foreign firms, and had Australian shareholders. Its major market was newsprint for Australia, and Australian newspapers and newsprint manufacturers sought to integrate it into their supply networks. This venture was what would later be called a public-private partnership. New Zealand private interests, especially Fletchers, joined with overseas wood processors such as Reeds and Bowaters, and with the New Zealand government to exploit the Kaingaroa forest. Other large companies in forestry such as New Zealand Forest Products focused more on servicing the local market.
Large companies often grew by mergers and acquisitions of other firms. In 1921 there were 55 brewing firms, in 1939 there were 34, in 1952 there were 26 and by 1972 there were just 4. In 1998 the two market leaders, Lion Nathan and DB Group, had 90% market share.
In the early 2000s industries dominated by large companies were often in a duopoly or oligopoly situation. In a duopoly two companies dominate the market. For example in the early 2000s supermarkets were dominated by two firms – Progressive Enterprises and Foodstuffs. In an oligopoly a small number of large firms dominate the market. For example four large multinational petrol companies dominate the New Zealand market – Shell, BP, Mobil and Caltex.
Public companies – companies which were floated on the stock exchange and which the public could buy shares in – were generally not very large in New Zealand until after the Second World War. For example Fletchers, which grew into New Zealand’s largest company by the 1980s, was a family-owned private company until it became a public company in 1940. The absence of privately-owned large companies was in part due to the small scale nature of the early colonial economy. Sectors of the economy where large companies tend to arise, were overseas-owned (banking, oil and shipping) or state owned (electricity, coal, forestry and railways).
Privately owned companies were mainly provincial and were small enough to be controlled and financed by families. Owners controlled companies and ownership passed from one generation to the next. From the 1940s the domestic market moved increasingly from a provincial to a national scale and the capital required grew beyond the means of most families. Many formed public companies and issued shares to raise funds. Others teamed up with overseas interests. The government was also heavily involved in trying to set up industries.
Over the 20th century New Zealand shared the trend towards greater scrutiny of companies, especially large ones. Company law was refined, not always in the direction of exerting greater restraint, but generally providing for more scrutiny. Competition law extended far beyond the initial anti-monopoly requirements, and eventually a government agency, the Commerce Commission (established in 1986), became responsible for controlling the acquisition and use of a dominant position in a market.
A 1971 survey found 166 enterprises employing more than 500 people in New Zealand. Seventy of these were in manufacturing, 59 in administration and 20 in transport and communications. There were 94 in the public sector and only 72 in the private sector.
Over the 1980s many of the large companies that had dominated New Zealand business for decades lost ground and new companies were established. In the early 1980s companies termed ‘corporate raiders’, such as Brierley and Chase, took over companies whose shares they thought were under-priced, bought shares until they had a majority shareholding, then sold off assets (termed ‘asset stripping’) or restructured the company.
The deregulation of financial markets from 1984 made global finance available, and corporate raiders looking to raise finance to buy shares in takeover bids had little trouble. Readily available credit fueled a share market bubble, and ultimately led to a crash in 1987. The fallout of the unregulated 1980s was a tightening up of the legal requirements for large companies through the 1990s, especially law relating to insider trading – selling or buying shares with insider knowledge unavailable to others.
Perhaps the largest influence of historic regulation was preserving large companies against competition. For example regulations limiting road transport protected the large government-owned railways. Once the restriction was lifted in the 1980s large road transport firms such as Mainfreight grew.
The requirement for companies that froze meat to have a licence protected existing large enterprises and frustrated innovation and new processing activities located near sources of supply. This also changed in the 1980s.
In the 1980s the privatisation and corporatisation of state-owned enterprises and deregulation of the economy saw a flurry of unimaginative company names: Electricorp, Coalcorp, Goldcorp, Landcorp, Petrocorp and Equiticorp.
Many large companies formed or grew as the government removed regulations and opened up the economy. It also established state-owned enterprises, government operations which were now to be run on a profit-making basis. This process was called corporatisation – if the ownership was still held by the government. Some companies were privatised. In 1987 Telecom became a state-owned enterprise when the former Post and Telegraph Office was corporatised. Telecom was then sold in 1990.
The electricity industry underwent a series of reforms over the 1990s. From one government-owned supplier, Electricorp (ECNZ), it devolved into competing companies. Trustpower was formed in 1993. In 1996 Contact Energy, with 22% of total electricity production, commenced operations as a state-owned enterprise generator in competition with ECNZ. Meridian, Mighty River Power and Genesis became large companies in 1999.
The NBR Rich List has been published since 1986. It outlines the richest people in the country and their holdings in different companies. Many on the list have family trusts. Determining who owns what is complicated with the greater foreign ownership in companies that has occurred since the 1980s. Another complication is that increasingly, large companies operating in New Zealand are owned by shareholders who are not individuals, but rather are other companies. In 2008 the 178 individuals and families on the Rich List (earning more than $50 million) controlled an estimated $44.4 billion.
Since the 1980s the list of the 50 largest companies in New Zealand has been a changing one. It is still difficult to measure which are the largest, as not all large companies are listed on the New Zealand exchange. For example giant dairy company Fonterra continues to have a cooperative structure and is not listed on the stock exchange.
In the early 2000s many of New Zealand’s largest companies were subsidiaries of overseas organisations. Capitalisation on the New Zealand stock exchange remains the best available indicator of a large New Zealand enterprise. In 2009 the largest was Fletcher Building (part of the former Fletcher Challenge conglomerate) followed by Telecom, Contact Energy and Auckland Airport.
In the 50 largest companies it was difficult to categorise what activity a business was in – some corporations have diversified and their activities have changed. In rough terms the largest group was financial services, just as it was in the 19th century. The next largest group was manufacturers of various kinds, often using both New Zealand materials and imports.
Hawke, Gary. The making of New Zealand: an economic history. Cambridge: Cambridge University Press, 1985.
Hunt, Graeme. The rich list: wealth and enterprise in New Zealand, 1820–2003. Auckland: Reed, 2000.
Hunter, Ian. Age of enterprise: rediscovering the New Zealand entrepreneur, 1880–1910. Auckland: Auckland University Press, 2007.
Jones, Stephen. Capital markets and the emergence of large scale companies in New Zealand, 1860–1900. Auckland: University of Auckland, Dept. of Economics, 1992.