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Directors’ duties - first featured in City AM on 13 march 2019 (page 19)

Directors’ duties - first featured in City AM on 13 march 2019 (page 19)

Published: 13 March 2019

Several months after Sir Philip Green became embroiled in a highly publicised scandal, Karren Brady resigned as chair of his retail empire.

Despite allegations of harassment and discrimination made by staff against Green, Brady initially intended to remain with Taveta Investments, the holding company of Green’s Arcadia Group. She cited her duty to employees as one of her reasons for staying.

Given that Brady had previously criticised abuses of power in the workplace, and had openly condemned the Hollywood director Harvey Weinstein, accusations of hypocrisy came flooding in.

She hasn’t spoken publicly about her reasons for departure, so we can only speculate. Perhaps she thought it the right thing to do for her own personal reasons, or maybe she felt that allegations of wrongdoing on such a scale impacted her ability to act within her duties as a director of the company.

In this context, what duties are directors under? And what should they do in circumstances of suspected or alleged wrongdoing by a fellow director?

A director who becomes aware of wrongdoing must understand their obligation to take appropriate steps to protect the company’s interests and assets.

When it comes to promoting the success of the company, directors must consider the interests of employees. They must also look to maintain a reputation for high standards of business conduct.

Simply disagreeing with the actions of a co-director is unlikely to be enough. Equally, a director who does nothing could also run the risk of personal liability.

It’s important to note that the precise steps will depend on the circumstances. But if you’re a business executive who suspects a fellow director is guilty of harassment or discrimination, here is some general advice.

First, advise that such behaviour is jeopardising the success of the business, and could even threaten the company’s future. As we’ve seen with Green, there is a real risk of legal claims being made against the firm, and of public backlash.

Second, record any concerns regarding behaviours and get them minuted.

Third, emphasise the importance of practising equality in the workplace, highlighting the benefits that it brings to business.

Finally, as long as a director can show that the matter was raised, it might be best to stay to try to influence the direction of the company, rather than resigning.

If in doubt, a director should take legal advice to ensure that they act within the realms of their obligations.

If a company director personally feels that they have no option but to stand down – which is likely the case with Brady – then seek advice. A director may still be held liable for any wrongdoing that occurred during their period in office.

In short, it is not okay to sit back and sweep problems or concerns under the carpet. The stakes are too high, and directors must act to protect both the company and themselves.

We don’t know what eventually pushed Brady to resign, but hopefully she raised her concerns before jumping ship.

Kyri Papantoniou | Partner | Corporate

For further advice in respect of the potential implications of Brexit on your business and how best to address them, please contact Kyri Papantoniou at kyri@fletcherday.co.uk or on 020 7870 3878.

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