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Good directors wary of joining SME boards

NZN 30/05/2016 Paul McBeth

New Zealand's small and medium-sized businesses are struggling to attract high-quality directors to their boards, leaving a gap for firms just when they need an experienced hand on the tiller, Financial Markets Authority boss Rob Everett has warned.

Speaking at a media briefing in Auckland last week, Everett said the Financial Markets Conduct Act hadn't led to the feared chilling effect claimed by business lobbies that talented leaders would turn their backs on governance roles, with large companies still attracting well-qualified professional directors. However, Everett said he has concerns about encouraging that same talent to join the boards of smaller, riskier companies.

"The challenge for New Zealand, given the make-up of its economy, is how to encourage good, experienced directors to get involved with businesses that have a much higher chance of failing, because that's actually where you want your best directors," he said.

"There we do see a reluctance for people to get involved because they do think, irrespective of the legal position, they'll get stigmatised if they get involved with a business that fails."

The FMA is into the final phase of the staggered introduction of the Financial Markets Conduct Act, an overhaul of securities law putting behaviour at the forefront of the legislation.

Everett said the new legislation was a better environment for directors to operate in and he rejected any suggestion the act made it more difficult or riskier for directors.

Still, more needs to be done to entice directors to join boards at the "lower end" where they will probably have to be more engaged and take a smaller pay packet, he said.

Last year well known professional director Rob Campbell pushed for directors to take a more hands-on role and work more closely with management, saying "most business needs activist, effective, participant directors."

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