Deconstructing Fletcher’s Board

With the February announcements that Fletchers CEO and Chair are both leaving the business, we’ve had reason to think hard about their board’s role in the results, and likely future. 

We’ve pulled the news announcements apart, trying to understand more about what happened, and how this might have lessons for others in governance roles. It’s hard to see what lies behind the boardroom door. We can’t see all the building blocks. But we have questions to share and have no doubt that others will be asking these too – and more. 

Is the current board the right board?

The Supreme Court decision in Mainzeal emphasised that construction industry experience is critical for a board of this kind of company: “The risk of significant cashflow issues was always present for a construction company with high turnover, low margins and significant project risks.” 

We don’t know whether this board can deliver on the strategy, but they absolutely need to be able to understand and monitor the risks. We imagine that the current board has been dedicated and hardworking, and tried to pull all the levers they can. But are they collectively the right board for right now? 

They are searching for a new person to appoint as Chair, rather than an existing board member. This is telling. 

Has the board done enough – good - succession planning?

Most of the directors were newly appointed in 2017/2018. With 1 new appointment in the last 5 to 6 years, has the board missed an opportunity to refresh itself? Have the succession planning discussions been formal and rigorous, and documented as the RBNZ recommended to financial institutions in 2023? 

It seems that the Board was out of step with the shareholders over the past few years. One example: in 2023, the directors sought a significant increase in their fee pool – but ultimately withdrew this before or at the AGM.

How will the board select a new chair?

With an Acting Chair in place (Barbara Chapman), the process for appointing a new Chair is underway. It will be fascinating to see who is selected and what new approach they bring to the Board and the company. 

How will the CEO selection process be run, while the Board searches for its own leader at the same time?

Very few organisations must replace both key leaders at the same time. We’ll be interested in these 2 presumably parallel processes. This last happened in 2018, when again there were Chair and CEO appointments at around the same time. Perhaps the results achieved since then show how hard it was to make this work. 

Has the board truly “held management to account”?

The CEO leaving, along with the Chair, is of course the ultimate accountability.  

But that is a last straw form of accountability to a board. The sharp drop in results announced in February, compared with forecasts only 6 months earlier, raises questions about what shareholders have been told and what the board knew when announcements were made. Problems with significant Australian and NZ legacy contracts have been extremely serious. 

We have no doubt that regulators will be closely examining the facts. No doubt there will be a careful postmortem of the publicly available information to consider this. 

Where to next?

We are interested to observe how the Fletchers board leads the way forward, to re-build the business and shareholder confidence in it. 

At Grounded Governance we provide the governance advice and governance support necessary to ensure you have met your responsibilities as a CEO or board member.  Contact us now.