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CSR, Diversity and Inclusion

Not for profit: a new director's duty?

MISHCON DE REYA, London - United Kingdom
19 May 2020

Whilst lockdown goes on and the furlough scheme is extended to October, directors continue to have to make decisions in difficult and unprecedented situations. For some, this has led to widespread criticism. For others, the repurposing of their businesses and focus beyond shareholder dividends has led to considerable praise.

As a director, you have a duty to promote the success of the company – and the benefit of shareholders is paramount.  Courts view directors' duties in the wider context, and this could not be more important in the current unprecedented time.  As a result, promoting the success of the company in the medium to long term no longer appears to be as simple as maximising share value and dividends. Stakeholders - and not just shareholders i.e. those interested parties who have an interest in the company's performance for reasons other than capital appreciation – need to be carefully considered.  

Take football, for example the Tottenham Hotspurs Football Club, who adopted the Government's CJRS scheme (the furlough scheme) for non-playing staff. This meant that non-playing staff were taking a 20% cut in their salaries whilst the footballers themselves, with much higher salaries, were remaining on full pay. Whilst (on average) only 9% of a club's income comes from ticket sales, the fans' views are very influential. Following an approach from the Tottenham Hotspur Supporters' Trust (THST) who opposed the decision, the board reversed their decision to furlough non-playing staff and confirmed that they would not be adopting the CJRS. The THST wrote on their website: "It takes maturity and humility to reverse such a contentious and public decision and we're pleased that, rather than doubling down, the club's board has listened to the fans on this occasion and ultimately done the right thing".

Tottenham's Chairman subsequently released a statement; "it was never our intent, as custodians, to do anything other than put measures in place to protect jobs whilst the club sought to continue to operate in a self-sufficient manner during uncertain times. We regret any concern caused during an anxious time and hope the work our supporters will see us doing in the coming weeks, as our stadium takes on a whole new purpose, will make them proud of their club".

About Mishcon de Reya

In times of such far-reaching and profound change we want to be the law firm that enables our clients - and our own people - to shape the world’s possibilities.

We are here to help our clients benefit from new economies, new geographic centres of wealth, the new global movement of people and capital, and the impact of new technologies and new knowledge.