Braithwaite case a timely reminder for directors
The verdict returned this morning in the case against National Finance director Carol Braithwaite is a reminder of the high standard of care and skill required of directors.
Institute of Directors (IoD) CEO Ralph Chivers said “Directors cannot rely on others to do their job for them. If they do not consider they have sufficient financial skills to adequately monitor the business of a company they must take steps to address that immediately. Similarly if a director doesn’t understand the business they are on the board of they need to remedy that. If they do not do so, they are going to be held liable and potentially prosecuted if a company fails and they’re found to have breached their duties.”
“A director’s role is an active one, not a passive one. This case, along with several other recent court cases, have shown that there are some directors that have been leaving it to company executives and advisors to make decisions that should be theirs. Directors are expected to really turn their minds to the decisions they are making and not just accept advice they receive at face value, but to really dig down behind it and satisfy themselves that it is correct.” Mr Chivers said.
“There is now and has always been a very high standard of care and diligence expected of directors, especially in matters relating to the management of other people’s money. It is disappointing that there is another case of this type before the courts but it is important to note that the vast majority of directors in New Zealand take their roles very seriously, are appropriately skilled and do a good job. This case should be a serious wake up call for the few who aren’t performing their duties as they should be.” Mr Chivers said.