Something practical the IOD could do for directors

March 28th, 2012

Tomorrow is the sad sentencing hearing for the Lombard directors. They may appeal but even success would not undo much of their disgrace. I've already explained here and here why criminal convictions for men who are honest are so damaging to the law.

Whatever the judge does is bound to disappoint and enrage investors who have now been given the wrong message that they have criminality to blame for the almost inevitable losses to many of them. And it will refresh the shivers that have rightly been steering our businesspeople and their opportunities far away from public listing.

The proper sanctions for poor judgment and bad timing and carelessness in business should be the natural damage to your reputation plus civil liability to compensate if a loss is connected to breach of a relevant duty. It is disastrous for criminal law to ruin its own status by branding with the label 'convict' in the absence of any evidence of conscious wrongdoing.

I do not know if any of the men concerned are members of the IOD (or any other club for honourable people). Even if they are not, the IOD and any such clubs could help to frame the proceedings in a fair light, if they announced that they would not automatically ask them to resign on sentencing BECAUSE THESE CONVICTIONS ARE NO EVIDENCE OF BAD CHARACTER OR CRIMINALITY IN ANY ORDINARY SENSE OF THAT WORD.

As Dobson J said on conviction "the law has created criminal liability for what may be no more than a material misjudgement "..

As a member of the Council of the IOD years ago, I pressed for us to make our claimed standards real, by expelling members who were found to be unethical, without delay. I do not know if they still try. They may consider it desirable, given their particular role to extend expulsion to directors who are found to be foolish.

But they would do all their members and the law a service with a statement to distinguish clearly between wickedness and carelessness or misjudgment.

I will ask a Club of which I am share membership with at least one of the defendants who I know to be honourable, to make this distinction clear.

Filed under Commercial, Criminal Justice

Comments

I happen to know that one of the honest men you refer to was a fellow of the Institute of Directors, and that they've already asked him to resign. So much for your hope that they'd show some spine and some leadership.

Cant. The offender Graham never visited any of the properties Lombard poured money into. The offender Graham, by his own admission, didn't do anything when Lombard was sailing close to the wind because he didn't know anything about property development. So why did he accept chairmanship of a company, a place on the board, if he didn't know how the company made or lost its money? Sad? No. Reckless? Yes. That's why, under the new Bill going through Parliament these directors more than likely would still be convicted, contrary to what you reckon, Stephen, and what that senior partner at Chapman Tripp opines, whatshisname, who's probably never argued such a case in court. Come on, you know without criminal justice, there would never be public sanctions against these sorts of people, just a shushing up behind the velvet curtains of the Wellington and Northern Clubs.

After nine weeks in the High Court the judge throws out 90% of the Securities Commission charges and concludes that in a very small part of a very large document two extra paragraphs were required to explain liquidity information – information which the company was providing to the investors' proxy, the trustee, on a weekly basis – and the Crown prosecutor's wife comes out swinging on her husband's behalf, presumably suggesting that men the judge found were impeccably honest are in fact not. What an awful thing to do.

Couldn't believe Denham Shale, president of the IOD, on Morning Report today suggesting that perhaps the directors of Lombard didn't have the necessary directorship experience to be on the board. That's quite an indictment on the IOD then Denham! After all, two of them were life members and/or fellows of the IOD, one of which the IOD used in the early 1990s to lecture aspiring directors!!! For Christ's sakes, these guys were hugely experienced directors, and given what they've been through the last thing they need is to have their experience questioned by someone who clearly hasn't a clue. People who question whether Sir Douglas had adequate financial markets experience to be chairing the Lombard board ignore that fact that for practically the whole time he held the role he was deputy chairman of the Guardians of the Government Super Fund, which means he was privy to the most up to the minute financial markets and investment advice and trends of anyone in the country. That made him extremely well placed to govern that board, which is something the judge in his trial accepted he did extremely diligently. So Denham, how about you come up to speed on a few things before opening your mouth. And how about the IOD quits buckling to the uninformed mob and comes out and backs these honest men?

5 bucks says Deborah Coddington's column this Sunday is on this case. How shabby is that? Her supposed intellect has always been a reflection of the rather ordinary men she hung out with (excusing Roger Kerr, who was a million miles too good for her!)

Otherwise good people get criminal convictions all the time for small errors of judgement and oversights.
A small moment of inattention behind the wheel of car, carelessness with a loaded gun, failure to perform the right check on a piece of equipment. What makes a director so much more special than these also otherwise good people?