Thinking Aloud - Culpability of the Board

Now the way it is supposed to work with Public Interest Entities (see i learnt that from reading
the Securities Commission's website) is as follows:

An entity enters the capital market by subscribing interest from the public by way of subscription to their shares being offered. These shareholders then will appoint Directors and these Directors collectively form the Board of Directors.

The Board of Directors appoints a CEO/MD/President to operationalise the strategy and achieve the key goals. Every quarter the management reports back on its performance, in almost all cases the performance report first goes to the Audit Committee, with the blessings of the Audit Committee the performance report is presented to the Board and ONLY upon the approval of the Board is the performance report lodged with the exchange, released for public interest consumption.

Now what  baffles me is, why when regulators take action against Directors of companies (e.g. Transmile, Megan Media, MEMS Technology, Silverbird,.....), its only against the executives and not the Board, bearing in mind,

A. The Board is the ultimate decision making body, so they are ALL responsible and accountable.

B. All Board members receive fees and remuneration, so as the lawyers would say, there is consideration, hence their fiduciary responsibility has to be contractual and without doubt.

C. The Companies Act states it is the Director's responsibility to maintain proper book of accounts and to ensure that proper sets of accounts are prepared. This is further affirmed in public interest entities where Directors in their Responsibility Statement acknowledge this fact.

D. Amongst the Boards responsibilities is, to lead and control and oversee the conduct of the business.

E. Bursa's rules clearly state that it is the Director's responsibility to inform themselves, so if they are not satisfied, dig, dig and dig until you are satisfied!

Therefore is there not the case for the Boards being collectively prosecuted, or is the trick in being a director is to be  a Non Executive Director, so as my friend says can "makan gaji".

The time has come for the authorities/regulators to review this situation, they need to come up with a solution so that better accountability is created. Possibly the solution lies in adoption of Bank Negara's "fit and proper person" rule or a data base of Directors and Senior Management that were in Public Interest Entities during "scandalous" periods so that stakeholders are informed! There are without doubts persons that should not be Directors being Directors at Public Interest Entities and this practice needs to stop. Silence or denial cannot be the solution.