Following on from our brief article published on 12 September 2017, on “Questions for UK Boards”, we have the some further questions for UK Boards:
If the FRC maintain or assert that you have to act with Entrepreneurial Leadership, (see this Guidance-on-Risk-Management-Internal-Control-and-Related-Reporting document for the background or our first article) how do you reconcile this with your ‘General Duties of Directors’ as required under section 172 of the Companies Act 2006:
The Act states:
Section 172: Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would
be most likely to promote the success of the company for the benefit of its
members as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term, [our emphasis]
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers,
customers and others,
(d) the impact of the company’s operations on the community and the
(e) the desirability of the company maintaining a reputation for high
standards of business conduct, and
(f) the need to act fairly as between members of the company.
Focusing specifically on sectiom 172(1))(a) (as highlighted above):
- What factors or methodolgy do you consider as part of the ‘likely consequences‘ consideration that you as Board member must apply in the decision-making process?
- Do you apply or depaly some form of risk-based assessment methodology?
This is not a check box exercise, however, you need to reconcile the general duties with being entrepreneurial, within the context of the Companies Act and Corporate Governance principles, right?
Do you have a tool, methodology, process or mental model to apply in order to assess potential scenarios and outcomes?
In the next article in this series, we will draw on inspirartion from the Value-Based Management school of thought on applying a bit more science and rigour to decsion-making and balancing ‘duties of care’ with exploring your inner Entrepreneurial spirit.
©2017 Rohan Badenhorst