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The basic duties of a
director of any UK company are laid down in Company Law. To quote from
Butterworths Company Law Guide: "Directors must act bona fide in the
interests of the company and must not exercise their powers for any
collateral purpose. A director must not place himself in a position where
his duty to the company and his personal interests conflict and he must not
profit from his position as a director. In addition, a director must
exercise reasonable care and such skill as might reasonably be expected of a
person of his knowledge and experience."
There are two things
worth noting here. One is that the directors duty is to the company and not
to shareholders, so shareholders cannot usually sue in English law for
perverse acts by directors except in the case of outright fraud. Secondly
there is no requirement for particular expertise when directors are
appointed - so if an idiot with no financial knowledge whatsoever is
appointed to the position of financial director, and he performs to the best
of his abilities, then that is OK. Indeed, as the roles of individual
directors are not defined, there is no necessity to even have a "finance
director".
Company law actually
says nothing about director selection, very little about their appointment
terms and almost nothing on the operation of company boards. As a result,
much of this depends on historic practice in the UK. Only recently have such
rules as the UK Listing Rules and the Combined Code on corporate governance
laid down guidelines for some of these matters, but the latter are only
advisory. See the separate Company Law,
Stock Exchange Listing Rules and
Corporate Governance pages for more
information.
Needless to say, having
confidence and trust in the boards of the companies you invest in, should be
an essential prerequisite. If the directors are acting in a manner which you
think is more in their interest than yours, or refuse to answer questions
about their or the company's activities, or appear to tell you blatant lies,
then there is little you can do about it (except sell your shares of
course).
Perhaps some basic
training in company law and ethics for anyone who is to be appointed a
director of a public company would be good idea - the Institute of Directors
(see www.iod.com) does offer such training
but it appears to be rarely taken up.
UKSA would like to see
an improvement in the training and qualifications of company directors, and
a clearer definition of their roles and responsibilities. |
