Governance and groupthink

What is corporate governance and why is it relevant?

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It involves balancing the interests of a company’s many stakeholders, such as members, employees, service users, suppliers and the community. The primary objective of corporate governance is to enhance corporate transparency, accountability, and to ensure the company’s purpose is fulfilled.

So far, so not obviously feminist. However, as more and more feminists in the UK begin to organise using corporate structures, it is important they understand the UK corporate framework. With that in mind, this is intended as the first of several articles about different aspects of UK company law.

It is essential that those assuming the role of director or trustee for the first time understand how governance contributes to a company’s success or failure. As a corporate lawyer and non-executive director, I have seen poor corporate governance lead to, sometimes irreparable, financial and reputational damage. On the other hand, strong corporate governance flows through an organisation, promoting good decision-making and adherence to the company’s purpose; this is why lenders and investors thoroughly review a company’s corporate governance systems before backing it.

A slightly depressing practical point is that companies organised by feminists have a more than usual number of activists seeking to distract, obstruct or suppress them. Good corporate governance and thoughtful, properly-recorded decision-making will provide the best defences against allegations of wrongdoing.

This topic therefore merits the attention of those of us privileged to serve as directors and trustees, whether of listed leviathans or of grassroots growth groups.

Types of company

Firstly, a word on types of companies. Companies come in various forms; the most common is the company limited by shares but in the context of the charitable, not-for-profit or voluntary sectors, companies limited by guarantee are also frequently used, as are charitable incorporated organisations (CIOs) and community interest companies (CICs). For the purposes of this article, the law on directors’ duties is the same, regardless of the type of the company. To confuse matters further, in some charitable organisations, the terms trustee and director may be used interchangeably; in any event, in broad terms, trustees of an organisation, whether or not it is strictly a company, will be subject to duties very similar to those covered in this article.

Directors’ duties

Directors and trustees have legal responsibilities that are regarded as “fiduciary” in nature. This means that a director or trustee must put the interests of the organisation she serves above her own interests and must think about the organisation’s stakeholders in all the decisions that she makes. In addition, she must act honestly and responsibly, with the skill and care that would reasonably be expected of a person in her position.

The Companies Act 2006 sets out seven specific duties that directors must adhere to, including:

To promote the success of the company.
To exercise independent judgement.
To exercise reasonable care, skill, and diligence.
To avoid conflicts of interest.
Not to accept benefits from third parties.
To declare interests in proposed transactions or arrangements.
To exercise powers for proper purposes.

The duty to exercise independent judgement

The duty to exercise independent judgement means that directors must not uncritically adopt the views of others, and must make decisions based on their own informed judgement. In making their decisions, they must consider all relevant factors and think critically; this may involve seeking out and considering alternative viewpoints.

Why focus on this particular duty? Where an organisation has been established to pursue a particular campaign or to promote a particular cause, the board is likely to comprise directors who all feel the same way about that cause. This type of cause-driven organisation therefore seems particularly exposed to the risk of “groupthink” interfering with the board’s independent judgement.

Groupthink occurs when members of a group conform to the opinions of the majority, rather than considering alternative viewpoints. This can lead to directors overlooking important information or ignoring potential risks. This may be from fear of disagreeing with a majority view or from a lack of diversity on the board meaning that the directors all agree with each other.

The former is unforgivable in a director. Accepting the responsibilities of a director means you have to be prepared to put forward an unpopular view or to ask difficult questions. Indeed, on some boards, where a thorny issue is being discussed, one director is sometimes designated to present the opposing view to help the board to ensure they have considered all viewpoints.

Diversity of perspective

Lack of diversity is the particular feature of campaigning and charitable organisations that increases the risk of groupthink. The directors of a company may be drawn from a pool of leading founders or their associates; the work and responsibility involved in being a director (usually on a voluntary basis at this level) is such that it will only be undertaken by strong supporters of the cause; and those who disagree, or are neutral, are unlikely to want to take on the commitment.

The executive team – those carrying out the company’s mission day-to-day – may well be motivated by great passion. The directors (or other directors if the executives are also on the board) must remain alive to the possibility that this could blind the executive team to potential risks or challenges. The role of directors, particularly non-executive directors, is to adopt a more dispassionate approach and not let their respect for, and often friendship with, the executives prevent them from discharging their duty to constructively, but robustly, challenge the executives’ proposals. A good executive team will welcome this challenge and appreciate the value added by strong corporate governance.

Practice points

Disagreement in the boardroom is healthy. A cosy boardroom is a risky boardroom. That said, disagreement should always be expressed politely and discussions should be constructive.
Try not to recruit new directors in your own image. If the company is large enough, the directors should prioritise achieving diversity of views and backgrounds. This does not mean that you have to recruit people whom you know to be actively opposed to the company’s purpose!
If you know the directors all feel the same way about a particular issue, make a point of honestly considering opposing perspectives.
Keep minutes! Minutes of a meeting signed by the Chair of that meeting are a definitive record of the proceedings of that meeting. Minutes should summarise the discussion, rather than trying to create a verbatim record but should encapsulate the range of views considered.
Keep the best interests of the company at the top of your mind. Consider whether a particular course of action or campaign is promoting the purpose of the company or could in fact harm it.
Avoid the trap of thinking that, because your cause is noble, anything you do in pursuit of that cause must be justifiable.
Consider complaints honestly. The board may receive complaints that it thinks have been made in bad faith, but it should take the time to reflect on whether any may have merit. The directors may decide (and record their decision!) to apply a filter, focussing on complaints that demonstrate knowledge and genuine concern on the part of the complainant, while ignoring those at the more, shall we say, ranty end of the spectrum or those that are all in identical terms, suggesting a spamming campaign.

Questions to ask, especially when the directors are in vehement agreement, include:

What are the arguments against this course of action?
What factors might we have failed to consider?
To whom might we have failed to listen?
Is it possible we are mistaken?


The issues outlined in this article are relevant to all campaigning groups, not just feminists; moreover, I should clarify that no individual feminist group has inspired this article. However, we can probably all identify campaigning or charitable organisations that appear to have closed their ears to opposing views and their minds to the possibility that they have lost their way. Some of their actions are so transparently self-harming that it is hard to believe that the board can have considered a full range of viewpoints and asked robust questions about the potential risks. These organisations are often large and well-established, with the contacts and resources to recruit (and pay) experienced directors and trustees with diverse backgrounds. If, even with these advantages, they can exhibit such poor corporate governance, how much more must our fledgling organisations guard against falling into the same traps.

Sex Matters in the Board Room – a joint Legal Feminist and Sex Matters briefing

You may recall that Legal Feminist responded to the FCA’s recent consultation on diversity on listed company boards LF FCA consultation. The FCA’s proposals would affect all listed companies, not just those in the financial services sector.

We welcome D&I initiatives and are pleased to suggest an alternative to the FCA’s proposals that is consistent with the current law on every footing – Companies Act, Equality Act, Gender Recognition Act and UK GDPR. It would also result in data being reported on a basis consistent with the ONS and other data reporting initiatives.

Legal Feminist has teamed up with Sex Matters to produce a joint briefing for those new to the topic, explaining the issues with the FCA’s proposals and the advantages of our suggested alternative. Although the consultation has closed, there is still time for those in the corporate and finance sectors to make their views known. If you are in those sectors and/or have contacts who would be affected by the FCA’s proposals, please use the Sex Matters emailer to send the briefing to your contacts either in your own name or via Sex Matters.

See here for the Legal Feminist/Sex Matters briefing.

See here for a link to the Sex Matters blog which explains how you can sign up to help distribute the briefing to those who need to read it.

Thank you!

Legal Feminist responds to FCA consultations

Legal Feminist has responded both to the FCA consultation on diversity & inclusion in listed company boardrooms and to a joint Discussion Paper of the Bank of England, the Prudential Regulatory Authority and the FCA on diversity in the financial services sector. In both cases, while we applaud the intention behind the proposals, and are strong proponents of data-driven policy-making, we felt that the way in which those intentions were to be reflected in rules and policy rendered the proposals at best ineffective and at worst dangerous.

Remarkably, the FCA’s proposals on “gender” reporting failed to disclose relevant conflicts of interest (Stonewall) and made no reference to existing legislation that already requires many listed companies to report their board composition by sex (take a bow, drafters of section 414C(8) Companies Act 2006).

PDFs of our responses can be found at the end of this blog. Below is the Introduction and Executive Summary of our response to the FCA consultation.

Legal Feminist is a collective of practising solicitors and barristers who are interested in feminist analysis of law, and legal analysis of feminism. Between us we have a wide range of specialist areas of law including company law, corporate finance, financial services, employment, data protection and privacy, discrimination and human rights law. Our range of specialisms enables us to consider holistically the issues raised in the Consultation Paper (CP) and our collective experience enables us to comment on the practical implications of some of those issues. As a non-aligned collective of lawyers from a range of backgrounds, we do not represent any particular firm or issuer and are therefore well-placed to give candid feedback on the issues raised by the CP.

We responded to Discussion Paper 21/2 published by the Prudential Regulatory Authority, the Bank of England and the Financial Conduct Authority (FCA). To the extent the DP and CP raise common issues, we may address those issues in the same terms.

As feminists, we generally welcome initiatives aimed at promoting diversity and inclusion (D&I) and we thank the FCA for its efforts to drive forward D&I initiatives. We particularly support proposals that seek to gather data to support policy making, provided this is done carefully. However, we recognise that such initiatives engage a range of legal issues and therefore need to be carefully considered by specialists to avoid unintended harm.

As the FCA has no direct responsibility for D&I matters, we are concerned that it does not have access to the particular expertise in international employment, data protection and privacy or human rights law required for a full consideration of the issues raised by the CP. Regretfully, we have formed the view that the proposals outlined in the CP are flawed, perhaps fatally, in view of the difficulty of reconciling them with other laws and regulations in these specialist areas.

Past practice in relation to regulatory intervention in matters of Environmental, Social and Governance has tended towards entrenching rules or policies developed by groups with relevant expertise – for example in relation to the codification in the Listing Rules of recommendations of the Task Force on Climate-related Financial Disclosures. We recommend that the FCA consider appointing a working group, comprising stakeholders with a range of expertise and interests, to consider its proposals further. Members of the Legal Feminist collective would be glad to serve on such a working party.

A number of our concerns are relevant to more than one consultation question. Accordingly, we have framed our response as a general discussion of some of these issues, to which we then refer in answers to the specific consultation questions. We have also included an Executive Summary.

Executive summary

The potential consequences of the proposals in the CP include:

  • confusing disclosures in annual reports as a result of the FCA’s failure to take account of the existing mandatory disclosure regime in the Companies Act 2006
  • poor response rate and/or non-standardised disclosures as a result of incompatibility of data collection and reporting with data protection rules of the UK and other jurisdictions
  • individuals with certain protected characteristics being easily identified, giving rise to issues of privacy and even personal safety
  • poor quality disclosures as a result of failure to take account of different ethnicity considerations applicable to global and overseas Issuers
  • poor quality data resulting from failure to collect data on sex on a disaggregated basis
  • difficulty of comparing data to other data sources, such as the UK Census, resulting from self-identification of gender (Self ID)
  • Issuers being exposed to possible discrimination claims from employees as a result of seeking to comply with rules based on Self ID
  • breach of the FCA’s Public Sector Equality Duty set out in the Equality Act 2010 (EqA) through the adoption of Self ID, which is not recognised by the EqA

For the full text of Legal Feminist’s responses to the consultation paper and the discussion paper, download the PDFs below.

“Cancel culture” – how should an organisation respond to a baying mob?

Image result for pitchfork mob

The scenario is now familiar: your organisation’s social media team is tagged into a Tweet that looks something like this –

Hey @yourorganisation, what do you think of your [employee / supplier’s] comments about [racism, feminism, social distancing, other wrongthink]?  Is @yourorganisation [racist, transphobic, NHS-hating] or will you [sack/cancel/condemn] your employee/supplier by the end of the day?

It is tempting for an organisation in this situation to hastily distance itself from the “offensive” statement and its maker (called the “Individual” in this article) in an attempt to call off the mob and protect the organisation’s brand.  Responses have ranged from terminating contracts[1], sacking Individuals[2] and explicitly or implicitly condemning Individuals[3].  But haste can lead to misjudgements, potentially resulting in an embarrassing climb-down or even legal action[4].  That makes choosing the right response to a “cancel call” important , particularly as the range of subjects which can trigger an outcry has expanded to include areas where nuanced disagreement is not only justified but also essential. To help organisations to keep their heads when all around them are losing theirs, we suggest a response protocol.  As ever, this article should not be considered legal advice – the needs of every organisation will vary.

  • Have a clear escalation policy.  It is too easy for a junior member of the weekend shift to be panicked into a crowd-pleasing response from which the organisation might have to embarrassingly row back.  The escalation policy should put a moratorium on any public statement being made by the organisation until staff with appropriate seniority (which may be the CEO or Chairwoman) have been consulted.
  • Remember that any public response must take account of legal responsibilities, for example under employment law or the Equality Act.  It must also avoid anything which is likely to be defamatory or any person or organisation. This is a very complicated area of law but as a starting point, if you write something which refers to a living individual and would tend to lower their reputation in the eyes of a reasonable reader, give strong consideration to alternative wording. However, the legal niceties of when something is and is not likely to be libellous (in the sense that it would give rise to a viable legal claim) are extremely complex and beyond the scope of this article. If you are in any doubt, it is worth seeking some professional advice before you respond. 
  • Put in place a draft holding statement like the one below.  This can be quickly adapted for publication once the escalation policy has been followed:
[Organisation] notes the allegations/complaints being made about [Name].  [Organisation] takes its values very seriously and these values include fair treatment of its [customers/employees/agents].  [Organisation] will look into the circumstances in more detail before taking any further action.  No further public statement will be made on this matter [until the circumstances have been investigated].
  • All team members should understand the need to refrain from further public engagement, even if customers, clients, advertisers, funders and industry bodies are tagged into the “debate”.  In rare cases it may be appropriate to make pre-emptive contact with key stakeholders to ask that they respect your position and not make any public comment on the matter.  If done at a senior level, most will understand the need to follow due process.
  • Make contact with the Individual, particularly if an employee, to tell them that no precipitate action will be taken and that any further investigation or process will allow them to be heard.  Depending on the circumstances, you might ask them to withdraw or edit their statement, at least pending further discussions.  However, we suggest you should avoid compelling or pressuring them to do so.
  • Ensure that any follow up investigation or action is conducted in accordance with internal policies and applicable law and regulation, such as the Employment Rights Act, the ACAS Code of Practice on Disciplinary and Grievance Procedures, and  the ACAS Guide: Discipline and Grievances at Work.  It is surprising how often organisations are panicked into ignoring their own policies, leaving an open goal for further action.
  • Line managers and department heads should be briefed on how to respond if employees complain, as when  a group of employees at Hachette UK objected to being asked to work on JK Rowling’s new children’s story, The Ickabog, because they disagreed with her views on transgender issues.  We suggest that the holding statement above can be adapted for this purpose. 
  • Any investigation or disciplinary process is likely to involve consideration of internal policies (particularly D&I and respectful working environment policies).  You should seek as far as possible to have tailored, rather than template, policies and ensure that they correctly reflect the law (for example in correctly reproducing the nine protected characteristics under the Equality Act). 
  • We also suggest that policies be drafted with an eye on the values of freedom of speech and diversity of thought and the potential for conflict of rights, such as employees’ rights to express and campaign for their political opinions.  An organisation’s policies and values should neither require Groupthink nor rule out the possibility of respectful disagreement.

Finally, social media pile-ons are unpleasant and often aggressive.  Remember if your agent, client or employee is being targeted, that this is an Individual with whom you chose to work.  Your response to a pile-on should always keep in mind the possibility that the mob may be mistaken.

[1] See the case of Maya Forstater v CGD Europe and others: 2200909/2019

[2] Gillian Phillip, a bestselling children’s author, was  sacked from the team writing under the “Erin Hunter” name after expressing support for fellow writer J. K. Rowling

[3] Actor, Laurence Fox was called a “disgrace” by Equity after expressing views about racism (or the absence thereof) in this country on Question Time .  Allison Bailey, an English barrister, was the subject of complaints after co-founding the LGB Alliance.  Without first discussing it with her, her chambers, Garden Court, tweeted that they were investigating Ms Bailey, implying that her behaviour warranted investigation .

[4] Forstater is in proceedings against her former employer, Fox won an apology from Equity, Bailey raised over £60,000 in under 24 hours to fund a claim against Garden Court and Stonewall