Developing your programme

The Representative Actions Directive provides that all EU member states have in place a consumer collective redress mechanism. To this end, the Directive obliges Member States to introduce representative actions into their legal systems.

Competition law is widely seen as a board-level issue, particularly as enforcement is increasing in this area. The law is rapidly evolving, presenting both risks and opportunities for companies.

Environmental, social and governance (ESG) related disclosures are one of the main means by which businesses communicate their ESG performance, strategy and impact to stakeholders. Corporates also increasingly make marketing claims, commitments and pledges relating to ESG factors, or about their products’ or services’ ESG credentials and metrics.

When a company is facing significant litigation, either as a claimant or defendant, its board needs to fully understand the general risks of litigation. Decisions to litigate as a claimant will usually be made at a senior (or board) level; being a defendant in proceedings is not usually a matter of choice but deciding to defend (rather than settle) is. In both cases, as litigation is often the last resort where other attempts to resolve matters have failed, the board needs to be well briefed.

The cryptoasset market has grown significantly in recent years and is now a buoyant financial market, with the global market currently valued at over $1 trillion, according to CoinMarketCap. The market has seen both retail and institutional activity and now many companies are considering the application of cryptoassets to their businesses whether as payment methods, bridges between traditional finance and alternative finance, market infrastructure or investment in itself. Whilst this presents various opportunities, it may also present challenges for boards in respect of navigating the market and the risks involved.

Following a number of high-profile pension scheme failures, the Pensions Regulator (“TPR”) has been given a greater arsenal of powers to bring companies and individuals into line, and to make sure that defined benefit pension schemes are front and centre in corporate decision-making. Board decisions that are seemingly unrelated to pensions need to be viewed through the filter of those powers – or the companies and individuals taking them run the risk of significant civil and criminal sanctions.

Protecting the health and safety of employees and non-employees is an essential part of risk management and must be led by the board. Failure to comply with health and safety legislation, and to implement effective procedures to protect employees and non-employees, can have profound consequences for businesses and individual members of the board who may be personally liable for any breaches. Directors should be actively involved in the implementation of health and safety policies and procedures to ensure risks are assessed and well-managed.

All businesses are dependent on their IT systems and the deployment of technology is a board-level issue.

For the board, contractual relationships form the backbone of business interactions. From internal office provisions to key supplier and customer relationships, contracts govern the terms upon which business is carried out. Written contracts create opportunity for clarity of precisely who is going to do what in the relationship and provide security and reassurance if the other party does not do what they committed to.

It is crucial for company directors to understand how their duties change and augment in times of financial distress for the company. If these duties are not properly discharged, it can result in personal liability and/or disqualification from acting as a director.

Many organisations include mergers and acquisitions (M&A) as part of their overall corporate strategy to achieve their business objectives. The clear and obvious benefits arising from the successful implementation of such a strategy include increased economies of scale, market share or as a means of entering new markets and regions.

The use of artificial intelligence (AI) can enable businesses to improve efficiency, reduce costs and deliver new products or services. As AI continues to transform industries and contribute more intelligently and efficiently to business activities, boards play a key role in integrating AI into their business and understanding its opportunities and risks.

Shareholder claims against directors are becoming increasingly prevalent with directors serving on the boards of publicly listed companies most exposed. The availability of litigation funding is making it easier for shareholders to obtain finance for such claims. There are a growing number of law firms actively seeking out such claims. There has been a greater emphasis on individual accountability for directors following the global financial crisis in 2008.

Businesses are increasingly subject to a new phenomenon in employee related disputes. A serious employee complaint can rarely simply be resolved through a one-to-one dialogue and, potentially, an exit agreement, especially where the main protagonist(s) is (are) at a senior level within the organisation. Multiple factors, often outside the usual HR regime, need to be considered at Board level to ensure that serious allegations do not derail the business.

Data can be one of an organisation’s most valuable assets but it can also result in significant exposure if not managed properly. Within a data ecosystem, many things can potentially go wrong – data can be lost, corrupted, not secured properly, misused or “overused”, excessive, inaccurate or kept for too long. Even for businesses that undertook a comprehensive General Data Protection Regulation (GDPR) implementation programme, managing data effectively is an ongoing exercise. The value of data assets and the high price of non-compliance means that data risk management has become a headline board level issue.

Directors’ risk report Directors of a joint venture company owe their duties in relation to the management of that company to the joint venture company and not to the shareholder that appointed them. The interests of shareholders (and group companies who may be sub-contractors to the joint venture company) will not necessarily coincide with those of the joint venture company. It is critical for directors to be aware of their duties and for any conflicts of interest to be properly managed. 

Executive and non-executive directors have a wealth of responsibilities, but no matter the nature of a particular role or industry, or the day to day demands of a business, all directors remain subject to a core set of directors’ duties. These duties should be key considerations for any decision-making process by a board of directors. Failure to properly comply with these duties can lead to serious consequences for directors and can even result in director disqualification.

The modern world provides a particularly challenging landscape for boards and directors to navigate as regards the protection of corporate and professional reputations. Firstly, the rise of electronic communication has meant that damaging false allegations and sensitive confidential information can be transmitted – and can gain traction – with frightening rapidity.

The magnitude of climate change risks is so huge and diffuse that it is sometimes difficult to comprehend the responsibility and risks to a particular company. The harm to the planet from such emissions has never effectively been internalised into the price of resultant products and services. This is where the sea change is happening. Directors will be keen to navigate the associated risks to ensure the future commercial health of their companies.

Environmental law is firmly and undoubtedly a board-level issue and all businesses need to focus on how it impacts their activities. Environmental authorities expect directors to play a key role in establishing and maintaining a culture of compliance in their organisations regarding environmental law. Any board that gets these issues wrong risks significant penalties not only for the business, but also for themselves as individuals. It is therefore critical that the proper management of environmental law issues is at the forefront of any responsible business compliance strategy.

The business vision and strategic direction set by the board are instrumental in the success of development projects. Board members are unlikely to be planning, development or construction experts, but an understanding of the potential risks for each stage of the development project will help the board to set the strategy and oversee the scheme as it progresses.

Directors have a key role in making sure that their businesses are aware of and have strategies in place to deal with financial risks. Any board that is unable to deal with these issues could face severe penalties, ranging from personal liability for individual directors to civil sanctions and disqualification. It is crucial that financial risks are dealt with robustly in any compliance strategy.

A cyber-attack can have a devastating impact on a business’s operational activity, lead to regulatory investigations, the imposition of fines and other costs as well as damage to reputation. The increase in home-working, use of new technologies and adoption by many businesses of new security arrangements as a consequence, has reinforced the importance of data security. Failure to understand the company’s cyber security arrangements and the impact of an attack could constitute a breach of a director’s duties under the Companies Act 2006. Ultimately, directors may face claims by the company (or its shareholders through a derivative action) if their breaches of duty cause the company loss.

Most boards are aware these days that equity, diversity and inclusion (ED&I) should be firmly on their agenda but sometimes struggle to understand why and what they should do to address the issues. ED&I should not be seen as an “HR matter”; it’s business critical, with accountability at Board level.