Tuesday, 26 April 2011
Conflict of duties between nominee directors and company law
City AM reported on 20 April on a call to shareholders by Pensions Industry Research Consultancy (PIRC) to vote against the re-election of directors of Anglo-Swiss miner, Xstrata plc who are nominees of (soon to be floated) Glencore. They argue that these directors are not independent enough. This simply exemplifies a long-standing incongruity in company law and governance. The Companies Act 2006 makes clear that a director's duty is to the company they serve - so how can the nominee of another company and likely shareholder possibly be carrying out their duty? They are nominated in order to represent that other company, otherwise why would they be nominated? But this is blatantly incompatible with the legal position.