PARTNER Director, Gregor McNally, shares his valuable insights on the responsibilities and risks associated with the coveted position of Director.
As an Executive Search Director, I’m often approached by up-and-coming executives looking to get their first seat on a board as a Director. While these highly sought-after roles are a fantastic way to broaden your skillset and facilitate professional growth, there’s no such thing as a free lunch: they come with a lot of responsibility, not to mention associated risks, too.
The Australian Securities & Investments Commission’s (ASIC) most recent figures showed 139 criminal charges were laid against Directors in the first six months of last year alone, with seven resulting in custodial sentences and $145.8m in civil penalties imposed. Not such a walk in the park now.
Candidates should be aware that Directors can be held personally liable for any actions or omissions which might cause harm to the company or its stakeholders. Breaches of their fiduciary duties (which include acting honestly and in the best interests of the company, avoiding conflicts of interest and exercising care and due diligence) can result in legal action being taken against them, huge fines being levied or their disqualification from serving as a director.
ASIC’s report shows 31 people were removed or restricted from providing financial services during January – June 2022, while 27 were disqualified or removed from directing companies. There are still 148 investigations ongoing.
This is not intended to dissuade candidates from these types of roles; as I mentioned above, they can be incredibly rewarding and an advantageous way to set yourself apart in a professional capacity. But candidates should go into them with their eyes open. Be prepared to put the time in, exercise a reasonable amount of skill and diligence and make it a point to implement robust risk management processes and systems. Part of your responsibility is likely to be maintaining the company’s compliance. Don’t neglect this; it’s vital to protect the company and yourself.
You can read more from the ASIC here.
If you would like to learn more about the duty of care and diligence as a Company Director, send me a message on LinkedIn, or contact the PARTNER team here.