Directors Duties – Positive, NOT Negative!

Many of the directors I work with would have found it far easier if the legislation that tells them what to do had provided a list of specific actions, like a set of commandments for directors. Many would have found a set of negative duties (i.e. a set of “thou shalt not’s”) far easier to respond to. The reason we tend to like this kind of negative requirement is that it in essence defines a minimum set of criteria that is normally measurable. We also like the fact that it is much easier to defend through applying a “tick-box” approach to the governance of a company.

The law does no such thing, instead it lays out a set of “positive” duties for Directors and Officers of companies – this set of positive duties is summed up in the words, care, skill and diligence. Positive Duties have no easy to identify “minimum” requirements or standards. They are also “measured” from the outside in – there is less credibility in a person standing up and claiming to have acted with care, skill and diligence than in someone else claiming the same. Directors and officers are also required to “act” in a certain way in the light of these positive requirements – no longer is the defence in a “tick-box” rather now it is in how their behaviour is interpreted by other.

The way directors need to act needs to demonstrate 3 key things;

  • Caring – have they taken everyone impacted by the organisation into account and treated them fairly, communicating timeously, accurately and completely;
  • Competence – ignorance is no longer a defence, directors needs to examine their own knowledge skills and abilities and identify the gaps they have – and fill them. They also need to be the first to admit to their lack of knowledge and/or skill and gain assistance from whoever can help;
  • Consistency – too often directors in organisations do not demonstrate consistency in thinking and acting like a director – this is not only the fault of non-executive directors who are not involved in the day-to-day running of the organisation, but also the fault of executive directors who do not do nearly enough work ON the company because they spend all their time working IN the company.

When you work as a director or officer in a company – i.e. you are a key part of making and/or implementing decisions it is essential to fully understand the Positive Set of duties the law imposes on you. Governing your own behaviour can no longer be done with a set of tick-boxes and a sigh of relief that they are all filled in, rather you need to be aware of your own behaviour and ask yourself am I demonstrating caring, competence and consistency in all that I do?

We have recently launched the 21 Days to Better Leadership – the leader as strategist and governor programme – please feel free to visit us there and provide us feedback.

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