7 - Directors’ duties

Summary

Perspective

Individual and collective board responsibility

There is an increasing link between individual success or failure as a director and the collective success or failure of the board of directors as a whole. The duties of directors, and the expectations others place upon them, have increased so considerably in scope and level that we have arguably reached a position where the effect of the law is to impose collective responsibility on all directors on the board, even where failure is directly attributable to only one or some of those directors.

The law has historically concentrated on the skill, care and diligence of an individual director, deciding that individual's responsibility by reference to his own honesty, culpability, competence, functions and qualifications and other factors personal to that individual director. However, there are now many instances where the failure of one or some directors could well indicate a collective failing by the board as a whole or, increasingly, where the board as a whole must take responsibility. This is likely to be the case increasingly in the future.

If this is correct, how has this happened and where has it come from? This chapter covers some significant developments which, when viewed as a whole, support the proposition about the increasing alignment of the individual and collective responsibility of directors.

But where does this proposition come from? It comes from a combination of the following factors.