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To comply with the duty of care, a director must pay assiduous attention to the business affairs of their office. If directors fail to perform the duties expected of them, it may be considered a breach of the duty of care, and even may be considered to indicate dishonesty. In addition, a director can also breach the duty if they fail to obtain specialist help or guidance when it is reasonable to do so in the circumstances. Whether a director has breached the duty of care will be decided after taking into account the degree of skill that can be reasonably expected from a person occupying a similar position. Should a director be in breach, other issues that will be taken into account are the general knowledge, skill and experience that can be reasonably be expected of a person holding the same office. When taking the duty of care into account, the judges will also consider the provisions of the Insolvency Act 1986 and the Company Directors Disqualification Act 1986.[21]
IV. The debate of Non-Executive Directors
UK company law does not recognize Non-executives as a separate class of director. Though some allowances may be made for differences in knowledge and experience, all directors owe the same legal duties and are equally responsible for decisions taken by the whole board. From the early 1980s onwards there was a growing awareness of the role of Non-executive directors, they play a central role in corporate governance in UK Companies. From the point of view of UK productivity and competitiveness, the progressive strengthening of the role of Non-executive directors is strongly desirable. Here, we will look at the position of non-executive directors from the contributions and weaknesses, which, it affects on the corporate governance.
A. Contributions
There have undoubtedly been improvements in the role and effectiveness of non-executive directors over the last decade, as companies’ corporate governance arrangements have increasingly come under scrutiny. Much of this improvement is attributable to the development and subsequent refinement of the Combined Code. This was the culmination of work initiated by Sir Adrian Cadbury’s Committee in 1992, and supplemented by the Greenbury Review in 1995 and the Hampel Review in 1998. As regards the role played by non-executive directors, the Cadbury Committee made the following observations:
“4.4 Whilst it is the board as a whole which is the final authority, executive and non-executive directors are likely to contribute in different way to its work. Non-executive directors have two particularly important contributions to make to the governance process as a consequence of their independence from executive responsibility. Neither is in conflict with the unitary nature of the board.
4.5 The first is in reviewing the performance of the board and of the executive. Non-executive directors should address this aspect of their responsibilities carefully and should ensure that the chairman is aware of their views. If the Chairman is also the chief executive, board members should look to a senior non-executive director, who might be the deputy chairman, as the person to whom they should address any concerns about the combined office of chairman/chief executive and its consequences for the effectiveness of the board. A number of companies have recognized that role and some have done so formally in their Articles.
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