Pressure On Directors Rises With Onerous New Code

Company Directors grappling with the looming recession are being warned that they could face litigation if they fail to abide by an onerous new code of duties now in force under the Companies Act.

The principle underlying the new code –'Enlightened Shareholder Value' – however requires Directors to take into account in their decisions and actions the interests of a much wider group of stakeholders, including employees, customers, suppliers and the wider community. They could ultimately face the prospect of litigation should they fail in their duties and obligations.

Central to the new code is the principle that requires Directors to promote the success of the company in such a way that it generates success in the widest sense for all members. In so doing, they must have regards to the likely long term consequences of their decisions to such stakeholders.