Lessons from the Qantas governance review for New Zealand directors

The Qantas Governance Review Report provides a sobering analysis of governance practices, underscoring the significance of strong oversight, balanced leadership and robust stakeholder engagement.

Initiated following a period of operational disruptions, public discontent and regulatory scrutiny, this review offers valuable lessons not only for Qantas but for boards globally. For New Zealand directors, the findings and recommendations from this review serve as crucial reminders of the importance of maintaining effective governance structures, fostering a culture of transparency, and ensuring that the board's oversight functions are rigorous and independent.

The Qantas board commissioned the review in response to a series of crises that significantly impacted the company's reputation and stakeholders’ trust.

The Covid-19 pandemic posed unprecedented challenges, forcing the board and management to make rapid, high-stakes decisions to ensure the airline's survival.

However, some decisions made during this period – such as handling customer credits, managing employee relations, and communicating with stakeholders – led to widespread dissatisfaction. These events highlighted gaps in the governance framework, particularly in how the board interacted with management and stakeholders. 

 

Strong CEO leadership 

Central to Qantas’ governance challenges was the role of its long-standing chief executive officer (CEO), whose strong leadership style greatly influenced the company’s trajectory. While a decisive CEO can drive swift decision-making and operational efficiency, the review found that this concentrated leadership also posed risks.  

The CEO's dominant presence sometimes overshadowed the board's input, leading to insufficient scrutiny of management decisions and a lack of diverse perspectives. This dynamic underscores the importance of boards maintaining their independence and ensuring that the CEO's influence does not undermine sound governance practices. 

Lesson: Boards must balance strong executive leadership with effective oversight to ensure that the CEO's vision and decisions are aligned with the company's long-term interests. A robust board should challenge and complement the CEO, ensuring that decisions are well-rounded and consider all potential risks. 

 

Key lessons for NZ directors  

The review resulted in 32 detailed recommendations, which the Qantas board has accepted. In the New Zealand context, we believe there are general lessons that boards can learn from this report.

1. Board composition and diversity 

The review highlighted the need for greater diversity on the Qantas board, particularly in terms of skills and perspectives essential for navigating contemporary challenges. Although the board was experienced, it lacked representation in areas like technology and customer relations, which are crucial in today’s business environment. 

Lesson: Diversity in board composition is essential for effective governance. New Zealand boards should regularly assess whether they have the right mix of skills to address current and future challenges, particularly in rapidly evolving areas like digital transformation and customer engagement. 

2. Governance processes and decision-making 

Despite having robust governance processes, the Qantas board's decision-making was sometimes hindered by a lack of rigorous debate. The board’s reliance on management for information, coupled with a collegial culture that avoided conflict, led to missed opportunities for more critical evaluations of key issues. 

Lesson: New Zealand directors should ensure that their governance processes encourage robust debate and critical thinking. Effective governance requires a culture where challenging the status quo is encouraged, and diverse viewpoints are valued. 

3. Risk management and crisis preparedness 

The Qantas review revealed deficiencies in how the board managed non-financial risks, particularly in preparing for and responding to crises. The company’s focus was skewed towards financial risks, with less attention given to operational, customer, and reputational risks. 

Lesson: Boards must continuously enhance their risk management frameworks, ensuring that they account for both financial and non-financial risks. Regular stress testing and scenario planning are crucial for preparing for unexpected challenges. 

4. Stakeholder engagement 

The review found that Qantas had inadequate mechanisms for engaging with key stakeholders, including employees, customers, and regulators. This lack of engagement contributed to the erosion of trust and ultimately harmed the company’s reputation. 

Lesson: New Zealand boards should establish formal mechanisms for engaging with all stakeholders, ensuring that their concerns are heard and addressed. Transparent communication and active engagement are essential for maintaining trust and long-term success. 

5. Ethical conduct and corporate culture 

The review also emphasised the board’s role in shaping and monitoring the ethical culture of the organisation. At Qantas, a strong safety culture was in place, but it did not extend to other areas of the business, leading to a disconnect between the company’s values and its operations. 

Lesson: Ethical leadership starts at the board level. New Zealand directors should take an active role in promoting a culture of integrity and accountability, ensuring that ethical standards are embedded across all levels of the organisation. 

 

Questions for NZ boards and directors 

There are four key questions for New Zealand boards and directors to consider from this review: 

1. Does our board composition adequately reflect the skills and perspectives needed to navigate current and future challenges, particularly in areas like technology and stakeholder relations? 
2. How robust are our governance processes in fostering critical discussion and ensuring that decisions are thoroughly vetted? Are we prepared to challenge the status quo? 
3. How do we balance strong executive leadership with effective board oversight to ensure that the CEO’s influence supports rather than undermines sound governance?
4. How is the board (similar to issues that arose in the Australian Royal Commission on banking) hearing and understanding the feedback from customers about their experience and what this is telling them about the operation of the company/organisation? 

The Qantas Board Governance Review is a powerful reminder of the critical role governance plays in an organisation’s success. For New Zealand directors, it offers valuable insights into the importance of board composition, governance processes, risk management, stakeholder engagement, and ethical leadership. By learning from Qantas’ experiences, New Zealand boards can strengthen their governance practices and better position their organisations for the long term.

Qantas Governance Review Report - recommendations

Key recommendations from the report are grouped into several thematic areas and summarised below: 

1. Board effectiveness, skills and culture 

• • Introduce norms or “ways of working” for the board to maximise dialogue, debate, and challenge
  • Reallocate board meeting time for increased effectiveness and identified priorities
  • Establish non-financial information flows, reporting and escalation norms
  • Strengthen board skills matrix and director assessments 
    
    

2. Risk governance 

• • Give greater attention to non-financial and cumulative risks
  • Unify the Qantas Group’s approach to all risk classes across the framework  
  • Enhance reporting on legal and regulatory matters
  • Review and update key policies such as whistleblowing
  • Ensure clearer responsibility for committees 
    
    

3. People and culture 

• • Amend the Remuneration Committee Charter to include key people and culture oversight
  • Introduce broader and more rigorous performance reviews for the CEO and Group Leadership Team 
    
    

4. Stakeholder engagement 

• • Establish stakeholder relationship owners to reset with key stakeholders
  • Adopt a more cooperative approach to stakeholder interactions and external communications

5. Customer focus 

• • Enhance reporting to the board on customer insights
  • Increase Board oversight of a comprehensive Group customer management matrix

 

By integrating these recommendations, New Zealand boards can enhance their governance frameworks, ensuring resilience and a stronger connection with all stakeholders in an increasingly complex business environment.

AI was used in preparing this article.