Majority of boards lack skill to deal with crisis

Only 30 per cent of chairwomen and chairmen have an 'excellent relationship' with their chief executives. Photo / Thinkstock

Less than half of company boards have the skills required to respond to a major crisis, according to research based on interviews with more than 30 chairs and chief executives of large listed and privately owned New Zealand firms.

Consultancy Board Dynamics, which conducted the survey, says interviewees included former Telecom chairman Wayne Boyd, Localist chairman and former Kiwibank chief executive Sam Knowles, Vector chair Michael Stiassny and Telecom CEO Paul Reynolds.

According to the research, only 40 per cent of boards had skills needed to deal with a major future crisis similar to the Christchurch earthquakes.

And the survey also found only 30 per cent of chairwomen and chairmen had an "excellent relationship" with their chief executives.

Board Dynamics managing director Henri Eliot said directors had a lot of work to do, at both board and executive level, to prepare for a future crisis.

"While the majority of chairs felt the executive team had challenged the balance sheet adequately, more than 30 per cent felt they did not have the right strategy in place to ensure their company survives in the new environment," said Eliot "This shows a dire lack of preparation on both the part of the board and executive team."

The survey found more than 30 per cent of the chairs interviewed felt they were not enabling executives to plan for what they needed to do in times of adversity.

"A dysfunctional relationship between chair and chief executive could have a devastating effect on a company's ability to react effectively during a crisis," Eliot said.

He said that during a major crisis the chair needed to focus on keeping the board functional. "A balance needs to be maintained between the need for decisions to be made while at the same time ensuring there is open discussion among all board members."

Eliot said relationships between chairs and CEOs needed to be resolved by identifying barriers and working out whether they could be overcome.

If they could not be resolved then either the chief executive or chair needed to step down, he said.

Eliot said dysfunctional relationships could arise because of New Zealanders' inherent desire to avoid conflict, which came at the expense of businesses and their shareholders.