Regulation

Government urged to create new body to sanction negligent directors

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13th June 2018
"It is essential that directors of companies are held accountable and appropriately sanctioned when they negligently fail to meet their duties. "

The Investment Association is calling for the Government to create a new, single authority with the power to punish negligent directors.

The IA wants the Government to replace the "fragmented system of director sanctions" with one single body which would be responsible for sanctioning directors who are negligent in fulfilling their duties.

There has been an increasing focus on director behaviour in recent years, with much more emphasis on boardroom performance and director accountability.

The IA’s Public Register has recorded 28 companies where 20% or more of shareholders have voted against a director resolution including director re-election in the 2018 AGM season.

Andrew Ninian, director of stewardship and corporate governance at the Investment Association, said: “It is essential that directors of companies are held accountable and appropriately sanctioned when they negligently fail to meet their duties. Recent high profile examples have clearly demonstrated that the current framework for sanctioning needs re-thinking.

“The current system of sanctions is fragmented between many different authorities, and often directors are only sanctioned as a result of investigations after a company goes into insolvency. By uniting the powers and responsibilities, we would be giving real teeth to a single body who could then hold any directors to account for being negligent of their duties.”

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