The GC100, an association of the general counsel and company secretaries of FTSE 100 companies, has published new guidance on directors’ duties. The guidance focusses in particular on the duty of a company’s directors under section 172 of the Companies Act 2006 to promote the company's success.
The guidance includes suggestions of matters directors should consider when discharging their duties, and practical steps they can take to that end.
Some key points arising from the guidance are as follows:
- Big decisions, such as shutting a factory down, are likely to warrant more time and consideration than less significant and more “day-to-day” decisions.
- A director’s job is not to balance the interests of the company and those of stakeholders. Rather, it is to weigh up all relevant factors and consider which course of action best leads to the success of the company, having regard to the long term.
- Directors should reflect on the duty in section 172 when setting and updating their company’s strategy.
- Companies should establish training on the section 172 duty for directors, both on induction and on an on-going basis.
- Directors should arrange to receive the information they need to help them carry out their role and satisfy their duty under section 172.
- Companies should put policies and procedures in place to support a company’s operating strategy and goals in light of section 172.
- Directors should consider the company’s strategy for engaging with employees and other stakeholders, whether through board engagement or wider corporate engagement.
- The guidance also places an overarching emphasis on culture. It encourages companies to embed a culture of considering stakeholders in the “habits and behaviours of board, management and employees”.