Another view: Section 172 and the Post Office Scandal
January 2024

On July 3, the former finance director of collapsed outsourcing company Carillion was banned from serving as a company director for 11 years.
As politicians belatedly fall over themselves to right the wrongs of over two decades of the Post Office scandal, clearly the role and, importantly, execution of corporate governance has once again come to the fore.
Despite countless reports of wrongdoings at the Post Office over the years, it is an ITV drama that has brought the scandal to the national conscience and, it would appear, that of MPs and government too, with rapid resolutions being pledged.
One of the key principles of strong governance frameworks is to safeguard reputations and yet the Post Office Ltd (POL) chose the opposite course to protect its brand in attempts to cover up deficiencies in its Horizon IT system, instead blaming, and moreover prosecuting, sub-postmasters.
Post Office governance failings
It’s a point raised in a submission to Sir Wyn Williams’ statutory inquiry into the scandal by Nick Gould, a solicitor who acted for three wrongly convicted sub-postmasters. He questioned whether the focus on the hundreds of private prosecutions and actions against sub-postmasters deflected from the organisation’s governance failings, notably those of the directors.
Gould, a corporate partner at Aria Grace Law, said in his submission and a lengthy LinkedIn post that there needed to be more focus on the corporate governance failings at the highest level of the organisation.
Corporate governance and directors’ duties “are far too often dismissed as having any relevance to real lives and real deaths”, Gould (who acted pro bono for Seema Misra – who had been jailed while pregnant – Tracy Felstead and Janet Skinner in overturning their convictions) said. “The behaviour of the boards of the Post Office over the years disproves, completely, that comment.”
He believes that POL’s continuous failures to make available various documents before, during and after hundreds of trials over many years led to significant delays in overturning convictions.
Gould said in his submission: “In terms of the board of directors and individual executive directors, it needs to be established as to what they knew and when? A constant theme of this paper is that, if they didn’t know, why not and if they knew, why did they not act, and indeed if they decided not to act based on advice – what advice?”
Section 172 and the Post Office
What happens after the inquiry ends should be of key concern for the legal profession and its regulators, in particular section 172 of the UK’s Companies Act 2006, which places on directors a duty to promote the success of the company.
Gould questions whether directors understood the implications of the Post Office scandal over some 20 years and/or why no director during that period thought it was a resigning matter. He also asked why no director knew (enough/anything) about it and/or each director thought the law, whether section 172 or other parts of company law, should apply only to other directors of other companies?
In our opinion it once again also calls into debate the most recent revisions to section 172 of the Companies Act 2016 and criticisms that section 172 reflects how success used to be measured, which often amounts to little more than financial performance.
Better Business Act
The Better Business Act (BBA), put forward by the BBA coalition – a broad church of companies of all shapes and sizes – sought to have the director’s duties set out in section 172 of the UK’s Companies Act reconsidered, from an onus to “promote the success of the company” to a duty “to advance the purpose of the company”.
These proposals include four core pillars, which would mean:
Aligned Interests: The interests of shareholders are now advanced alongside those of wider society and the environment. This establishes a new principle of fiduciary duty within section 172 of the Companies Act.
Empowering Directors: This change must empower directors to exercise their judgement in weighing up and advancing the interests of all stakeholders.
Default Change: This change must apply to all businesses by default. It must no longer be optional to benefit wider stakeholders beyond shareholders.
Reflected in reporting: Following this change, businesses must report on how they balance people, planet and profit in a strategic report or impact report, where one is currently required.
Ironically, the Post Office promoted itself as a business with social purpose and yet clearly it fell catastrophically short of its supposed standards and, finally, looks set to face the full consequences of its actions.

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