UK: courage and the non-executive director

Yesterday's Observer newspaper reported claims by Lord Foulkes of Cumnock that at least three of Royal Bank of Scotland's former non-executive directors "may have been intimidated and threatened with the sack for asking searching questions about its financial affairs". The role of non-executive directors is under the spotlight, as part of the Walker and FRC reviews of corporate governance.

The FSA is also updating its Statements of Principle and Code of Practice for Approved Persons (APER) to provide, for the first time, an explanation of the expectations placed upon non-executive directors of FSA regulated firms. This focuses on the non-executive director's role but does not identify what is arguably the most important personal trait a non-executive director should possess: courage. If non-executive directors are unwilling to challenge, a fundamental principle of the Combined Code - that no individual or small group of individuals should dominate decision making - is threatened. 

The importance of courage on the part of the non-executive directors has been recognised by the courts: see, e.g., Secretary of State for Trade & Industry v Swan & Ors [2005] EWHC 603 (Ch), para. [241].