DIRECTORS OF COMPANY BOARDS HAVE PERSONAL AND COLLECTIVE LIABILITIES.

THE ROLES AND RESPONSIBILITIES OF THE COMPANY BOARDS.

Holding positions in any environment has responsibilities, risks and rewards involved.

Most countries around the world have made it mandatory for the public listed companies in the jurisdictions to have board and appoint directors with credibility, competence, knowledge and experience to support the executive management drive the development, growth and long-term sustainability of the companies.

A major reason driving the above requirement is the perception that the executive management may sometimes act in bad faith towards their companies for their own best interest, therefore, will require an independent board to oversee the activities of the management to prevent misconducts or call them to order when misconducts happen. Another major reason is that the executive management may sometimes lack the depth of knowledge, experience and competence required to deal with some certain complex situations and as a result will need an experienced board to provide advice and guidance on how to deal with the situation.

The benefits arising from the above have inspired regulators in other industries to demand the same for the companies in their sector.

Directors of the boards should be value creators, protectors and disciplinarians bringing their best foot forward for the best interest of their organisation and contributing to building stronger national economy and financial stability. However, based on the trends of the events happening around the globe, some directors of boards have not been living up to the expectations. One of the major root causes is knowledge gap.

Many individuals have accepted director appointments to the boards without being prepared for the roles and risks involved. As a result, some have breached the rules out of negligence and mistakes, and regrettably have suffered unimaginable embarrassments and losses.

When scandals happen in the organisations, many interest groups including the general public would make judgements and form perceptions based on many factors. Some of the critical questions often asked are:

• What is the position of the board on the matter – whether the board was involved, and the individuals affected?
• Was the board aware of the matter before things got out of control?
• What did the board do when they got to know about the matter – did they frown at it, condone it or did nothing?
• What laws, regulations and company internal policies are in place to prevent and deal with such matter?
• Has the company applied the requirements of the law, regulations and company internal policies in dealing with the matter?

Ignorance of the law is no excuse for any one.

Failure to demonstrate that the board followed due processes on scandalous matters may cause the company and the individuals involved to be sued by the aggrieved party/parties, thereby causing the organisation and individuals to suffer losses. This calls for diligence, skillfulness and discipline for the directors and acting responsibly in words and deeds at all times, both within and outside their work environments.

Before accepting board appointments, the individual has personal responsibility to have reasonable understanding of the risks involved. This requires understanding the duties, rights and liabilities of the board and directors from the legal, regulatory and best practices perspectives. The codes of corporate governance and companies act applicable to the geographical region and industry provide great sources of information. Also, required to know are the negative and positive news about the company and these can be sought from the company’s audited financial statements, websites, traditional media, direct inquiries from individuals, google and social media search engines.

It is important to know that each country has specifications of what constitute the duties, rights and liabilities of the boards and directors of the boards.  Presented below are the high-level overview of some of the specifications that appear to be common across all jurisdictions.