A seat on the board's too great a risk, study finds

After the global banking crisis, and subsequent scandals such as libor-rigging, the mis-selling of Payment Protection Insurance (PPI), and the activation of the Bribery Act, there has been a rise in “corporate criminalisation” with action increasingly being taken against individuals as well as companies.

Nick Buckles, the former boss of the global security company G4S was interrogated on television for not meeting the government contract and providing enogh security to safeguard the London 2012 Olympics

“Although the US has long been a leader in enforcement against corporations, other jurisdictions are catching up. UK and regulatory activity is increasing, and its criminal authorities are looking to take action against corporates and individuals alike,” said Luke Tolaini, partner at Clifford Chance.

The report also showed that 82pc of UK board members are investing time and money in improving risk management, but fear this “over-emphasis” may be inhibiting growth.

Nearly one-third of the 320 surveyed were concerned about a scandal arising involving tax, because of the strength of public opinion surrounding the issue.

Remuneration and bonuses are also under scrutiny with 32pc of respondents saying that the possibility of brand damage has led to changes to executive and non-executive pay.

“UK corporations have a minefield of issues to navigate as they try to protect their business against incidents that could severely damage their reputation,” said Guy Norman, a partner at Clifford Chance.

“With tax and executive pay coming under greater scrutiny from the press, public and politicans alike, UK boards are smart to take a stance on these issues; although not illegal, they may be considered by many as immoral, causing the kind of reputational damage that can be hard to bounce back from.”

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