The Royal NZ Yacht Squadron has failed the country by letting the defence of the America's Cup go to Barcelona, Sir Michael says.
Sir Michael, who backed three losing bids for the America's Cup, is considering cutting ties with the club over the loss of the regatta to Spain.
He has been a club member for 45 years but says it has badly handled the situation, effectively allowing Team New Zealand boss Grant Dalton to make the decision.
"What they've done is they've actually not kept control of the decision on venue... It's their job, absolutely, it's their job.
"This should not have happened. This didn't have to happen. From the club's point of view it should never have happened."
Sir Michael says the country has built "a fabulous record" in the regatta, probably the best track record of any country and remains a dominant force.
He believes the America's Cup has been a huge benefit for this country - in terms of attracting tourists, building goodwill overseas, providing work for the boating industry and momentum for the Auckland waterfront development.
He is also adamant that Team New Zealand owes the country for the way it has come together and supported the cup in the past.
"It's always been about New Zealand and I find it very disappointing that those linkages have been broken and there doesn't appear to be any suggestion that the team owe New Zealand - that's the surprising bit for me."
He says when Sir Peter Blake successfully challenged for the America's Cup in 1995 and then defended it five years later, the benefits for New Zealand were his main motivation.
He believes there was enough money on offer for a successful defence in Auckland but Team New Zealand seemed determined not to "entertain any proposal" that would have retained the event here.
Club has control not an individual
Sir Michael says the Americans set up a structure under a deed of gift so that a yacht club always had to have control of the competition, not an individual.
He objected to the sight of Grant Dalton being photographed with the America's Cup in Barcelona this week when as far as he is concerned, it should be still in a cupboard at the Royal NZ Yacht Squadron until it is challenged for successfully.
"We're seeing a bad development, I think for the America's Cup in the future."
Many New Zealanders will be shocked at the move to Barcelona alongside Royal NZ Yacht Squardon members who are owed an explanation, Sir Michael says.
"I think we all deserve to know, not just the members, but New Zealanders at large, followers of the cup, the companies, the supporters, the people who have been around the cup for such a long time. Why did this happen? Why was it not kept here in New Zealand by you and the club?"
He would like Grant Dalton to also explain the decision.
The Royal NZ Yacht Squadron could not be reached for comment.