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.

Everett last week said the Financial Markets Conduct Act had not 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 act, an overhaul of securities law putting behaviour at the forefront of the legislation.


"I just don't buy the position that under the FMC Act, particularly around financial products and capital raisings, that actually the situation for directors is anything but clearer and more flexible than it would have been before," Everett said.