The question of shadow directors has always intrigued me and it is an issue which raises its head mainly in times of trouble. A shadow director is defined as:
“a person who instructs other directors what to do and those directors follow his instructions. Individuals who act in this way are deemed to have the same liabilities as properly appointed directors”.
I am sure some bright lawyer (yes there are a few) can write a very long and possibly very boring epitaph about shadow directors. I have heard lawyers talk about shadow directors a lot, and it has been drummed into me that this is a serious issue. I wonder how often a case has been made, but let me discuss the concept of shadow directors as I look at what the US is doing at the moment.
In business we have Directors who watch over the affairs of the company, set strategy and who are responsible to ensure the company and all its stakeholders (what a wonderful word), especially shareholders, are protected. For a country those same tasks are the responsibility of the government, however they have been elected.
Increasingly the US is stepping into the affairs of the UK. Perhaps it has always been the case, but there seem to be more extreme cases at the moment. First there was the insistence from the US that we export a few of our residents, which was thoroughly disagreed with on this side of the pond. This included some bankers, which was ludicrous, but as they were bankers and had worked on some of the “extreme banking” deals we have all come to strongly dislike, they generated little general sympathy.
Then came the challenged but very bright young man who managed to break into some ‘sensitive’ computer in the US. We all get people who break into our computers, including governments I suspect, so big deal. Well, the young man had to be exported.
Both these cases may be reasonable as the crimes were in some way connected to the US, but both cases could have been dealt with in British courts. It was also clear that these exportees would not receive the same treatment in US prisons as their US colleagues would, which does not speak well for ‘equality for all’.
Then we have the oil leak which is destroying the Gulf Coast of the US. Since then various directors of BP have been called to the US Congress to have a chat with various politicians. Even the President, whom I greatly admire, went macho. He publicly stated he wanted to see the CEO of BP fired and I get the impression he pushed a lot of powerful people to achieve that goal. Not only did he get what he wanted, but he got Mr Hayward replaced by an American (I thought he had emphasised the British in BP?!?!). Coincidence or shadow directorship?
Let’s imagine that due to Mr Hayward being removed the share price drops through the floor (I know it takes some imagination, but I am sure there are some people left who admire Mr Hayward). Then let us imagine that it was in fact let us say Halliburton who was responsible for the whole mess (a little less hard to imagine maybe). If it can then be shown that the President was in fact influencing major US shareholders and thereby the Board of BP (British Petroleum) in its decision making unduly, does that not put him in a position of shadow director?
Now the US congress wants to hold UK and Scottish politicians to account for the release of a prisoner. Whether we agree or not with the decision to release Mr al-Megrahi, it is ludicrous that our politicians should report to the US Congress on their interpretation of our laws. This puts the US government in the position of being a shadow government for the UK – mind you we need a decent shadow government, but I cannot remember Labour asking Congress to do the honours whilst they sort themselves out.
When you are in your next board meeting, consider how you deal with your shadow directors. We all get influenced by people who have an interest in our business, but the US is taking matters too far in the case of Britain.