Reforms pile pressure on IT directors
A government bill published last week could discourage IT professionals from rising to the top of their profession, experts have warned.
The Company Law Reform Bill will enshrine shareholders' right to sue board directors into law for the first time, and will force companies to lay out the duties of its directors. Up until today, the duties of a company director have often not been made clear, making it harder for shareholders to sue them if things go wrong.
Lawyers say the change will put more responsibility onto IT directors, who could now be held liable for the consequences of, for example, a large outsourcing contract that fails and costs their company money.
Michael Gough, chief executive of the National Computing Centre, said the reform could deter IT professionals from joining the board.
"It begs the question why anyone would want to be a director these days. Dispensing with the rhetoric, most major investment (or divestment) or outsourcing decisions are not likely to be the sole decision of the IT director, therefore specific action against an individual would not be very likely," said Gough.
The reforms could have a positive impact as boards will "have to more diligent in the documentation of their rationale for their decisions, citing clear business reasons for their actions," Gough added.
Martin Webster, partner at Pinsent Masons and author of The Directors' Handbook, said the new reforms put in black and white what already existed in various case laws. "It is just codifying the duties of the directors to the company that already exist in case laws just not in statute, this brings it all together in one place as one code. This does not give shareholders the right to sue directors personally," he said.
However Webster warned that shareholders could use the threat of action against directors if they don't adhere to the code and it is this which could cause problems. Theoretically individual shareholders could take action but are likely to be over ruled by the judicial system, he added.
Gough believes that complying with the Bill will put an extra strain on senior IT staff.
"Inevitably, this will put more pressure on chief information officers and IT directors which reinforces the need for a strong professional body to support this community," Gough said.
A spokesman for The British Computer Society (BCS) agreed that reform will place extra pressure on to the shoulders of IT directors. "This reflects the increasing responsibility of IT professionals within their respective organisations and acts as a warning to IT professionals to adhere to the standards as outlined by the BCS."
The Bill is likely to become law next year.