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CMS: Advising the Board on Director Duties Risk

CMS have published a new ‘Advising the Board’ report as part of their Risk, Resilience and Reputation series. Executive and non-executive directors have a wealth of responsibilities, but no matter the nature of a particular role or industry, or the day to day demands of a business, all directors remain subject to a core set of directors’ duties. These duties should be key considerations for any decision-making process by a board of directors. Failure to properly comply with these duties can lead to serious consequences for directors and can even result in director disqualification.

The Report sets out a comprehensive summary of areas to consider in terms of being a director and the risks that are involved, including an outline of the statutory duties that are applicable to all directors – executive and non-executive.

As part of understanding a director’s personal risk there are some key questions to consider under the headings noted below:

  • Appropriate skillset – is the company’s business one which you understand sufficiently (or can readily learn about)?
  • Conflicts – do you have other interests which may conflict with the company or your involvement with it?
  • Board composition – does the board composition address the needs of the company?
  • Dominant personalities – is there a dominant director/executive or shareholder who may compromise the board’s independent decision-making?
  • Understanding all stakeholder interests – directors need to consider not just shareholders’ interests but also the company’s broader environment?

The Report includes an ‘Expert perspective’ where Louis Cooper, CEO NEDA, provides some insight on the professional role of the director, board effectiveness and the management of personal risks.

To read the full report click on the link.

 

 

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