United Kingdom: The dilemma of the dissenting director

Board meetings benefit from healthy debate amongst directors, but decisions are usually made by way of majority vote. What is a dissenting director to do?

Background

► The UK Corporate Governance Code (the Code) recommends that directors should raise their concerns at board meetings and, where their concerns cannot be resolved, they should ensure that they are recorded in the board minutes.

► A director cannot absolve themselves from liability incurred during their term of office simply by resigning.

► Continued attendance at board meetings will help demonstrate that the director is exercising reasonable care, skill and diligence in the performance of their duties.

Obtain help

► Directors who feel that their position has become untenable should seek advice in light of the specific issues which they face and the company's position, including its financial situation.

► The Code recommends that the board should ensure that directors have access to independent professional advice at the company's expense where they judge it necessary to discharge their responsibilities as directors.

► If the company's whistleblowing policy applies to director employees and non-executive directors, it should be followed before the director considers going public.

Seeking protection

► Directors who are also employees will be entitled to protection against unfair dismissal if they are removed by their fellow directors.

► A new cap in compensation for unfair dismissal claims will come into force this summer. It will cap compensation at the lower end of £72,400 and 52 week's pay. It won't apply if a director has raised a "qualifying disclosure" under the whistleblowing rules or a dismissal has a discriminatory element.

► We expect more employees to try to use whistleblowing to lift the cap on compensation. Where they do so, we expect to see employers relying on the "no public interest" defence. The "public interest" concept is new in the employment field. We consider the litigation risk to be high whilst the meaning is fleshed out.  

► Whilst it will certainly prevent whistle-blowers from making disclosures which are purely in their own interest, it remains to be seen whether it will discourage genuine whistle-blowers from coming forward.