Is the worm starting to turn? After many years of relative calm—save a small number of judgements including this example from the New Zealand finance sector—directors seem to be facing increased levels of scrutiny, including being held accountable for actions (or inaction).
A new judgement, by the Supreme Court in England, places a stake in the ground for British companies. The seven judges determined (unanimously) that directors were responsible for their actions, and that where those actions were fraudulent directors should be held personally accountable. No doubt some directors will throw their arms up in horror, asking how they could possibly know everything in order to make informed decisions. Yet directors are responsible for the overall operation and performance of the business they govern. Therefore, directors have a duty of care to become informed before they make a decision.
The Jetivia–Bilta judgement provides a timely reminder to directors. Precedents have now been set in several countries. The buck stops with us (yes, I am a director too). Directors need to ponder the implications carefully. Thankfully, those who are not happy to carry the responsibility and accountability that goes with every appointment have an 'out'—they can (and should) resign.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.