Research Handbook on Directors’ Duties
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Research Handbook on Directors’ Duties

  • Research Handbooks in Corporate Law and Governance series

Edited by Adolfo Paolini

Directors’ duties and liabilities have become the centre of a general legal discussion following the 2008 financial scandal that resulted in global recession. Questions have arisen regarding the ways in which the directors of the world’s major financial institutions have handled their duties and how their decisions have impacted investors, shareholders and consumers. This detailed Handbook discusses the nature of the relationship between a company and its directors, assessing issues such as how duties are discharged, liabilities that may arise and what interests directors should consider before embarking on commercial ventures.
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Chapter 12: Non-executive directors in financial institutions: a demanding standard of care

Adolfo Paolini

Extract

Worldwide economies are experiencing difficult times due to financial inability to meet national debt payments for the foreseeable future. Countries work hard to cut costs, at the expense of certain social needs, therefore reducing budgets in areas that may impact the past, current, or future workforce. The financial turmoil caused by some of the most representative banks between 2007 and 2009 is still bearing poisoned fruits so the 2011, 2012, 2013 and possibly the 2014 vintages have been affected by this unwanted fungus. It is no longer a mystery what happened in the recent past to precipitate the financial crisis: unscrupulous bankers tried to maximise profits at any cost, while investors underestimated the risk behind certain financial operations, and regulators failed to implement either suitable rules or apply the ones already in place and some credit rating agencies masked the reality by failing to provide good intermediary services, rightly assessing the creditworthiness of financial instruments or acting as efficient gatekeepers for issuers of debt instruments. It would be unfeasible to cover in this chapter all the causes of the present financial troubles so it will instead concentrate and assess only one of the neuralgic causes of this worrying time.

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