Recent times have not been good for chief executives and boardrooms around the world. Tyco in Bermuda, Enron and World Com in the United States, Vivendi in France and Marconi and Equitable Life in England have all experienced difficulties. The former directors of Equitable Life, for example, are being sued for more than $4.8 billion with no certainty of insurance coverage. In the United States, claims against directors are increasing with insurance coverage becoming narrower and more expensive. Scandals have varied from unbelievable compensation packages, for example monthly visits from mom paid for by the company and millions of dollars paid before the chief executive has done a day's work, to bad acquisitions.

In the United States it is not unusual for the same person to be both chairman and chief executive of a company with board members having commercial links with the company. In England, conversely, the chief executive reports to the board, which usually has a non-executive chairman. In Germany, companies have a 2-tier board. A management board is responsible for the day to day running of a company with a supervisory board, which has representatives of shareholders and workers, considering strategic issues.

Germany has produced a code of governance, Canada has published guidelines for listed companies with France and England also undertaking reviews. The United States has published recommendations on the position of the chief executive as well as shareholders and auditing practices. New duties and limitations may prevent future scandals, having an impact on managerial conduct and accountability at an operational level.

Those running companies not only have the obligation to make money but also have responsibilities in other areas such as environmental protection and health and safety. Another area of developing activity is corporate responsibility for crime. There is a growing trend to enforce responsibility through non-monetary sanctions including corporate dissolution, disqualification, imprisonment and the non-legal sanction of adverse publicity.

Imposing penalties on `flesh and blood' rather than or as well as on the corporate body is likely to grow. However, there are difficulties in seeking to impose personal obligations upon those running companies. It is not always easy to decide who is the decision maker and individuals may be scapegoats for the failure of others while the indemnification of directors and officers insulate those persons from the effects of personal liability. `Organisational' wrongs inevitably fail to provide a check on human error.

However in the United States the Securities and Exchange Commission is considering requirements under recent legislation which include: ?establishing a public accounting oversight board to oversee the auditing of public companies with restrictions on the consultancy services that auditors can offer clients; ?audit committees on which `financial experts' are named, stating whether or not they are independent; and ?chief executives and finance directors signing off on a company's annual and quarterly reports.

The New York Stock Exchange has added the following proposals: ?listed companies having a majority of independent directors not having previous links with the company; ?the publication of corporate guidelines including the annual evaluation of the board and the chief executive; and ?regular meetings of non-executive directors at which the company's management is not present with the presiding director's name made public. At such meetings these directors will be able to consider the extent to which they are aware about a company's affairs. In the future the time demands on board members will increase with the need to have greater knowledge of a company's affairs not to mention the need for board members to thoroughly prepare themselves for meetings.

Domineering chief executives with compliant boards may be a thing of the past replaced by a knowledgeable, challenging and questioning board requiring the chief executive to listen, and explain. Investors (the shareholders) may also have a role to play demanding and obtaining more information about the company they own.

Within the corporate field of Bermuda law section 83 of the 1981 Companies Act ("the Act") imposes an obligation on every company to maintain proper records of account which must be kept at the registered office or such other place as the directors think fit. If the records of account are kept outside Bermuda there must be a place in Bermuda where directors can establish with reasonable accuracy the company's financial position at three monthly intervals.

The Act (section 97) also imposes on directors and officers the obligation to act honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent man would exercise in comparable circumstances.

It will be interesting to see the extent to which the more demanding international standards are applied in Bermuda. At the end of the day, however, the most important requirements in the running of a company and the behaviour of directors, persons acting with commitment, honesty and integrity, are qualities which no legal system can impose or guarantee.

Attorney John Evans is an associate with A.S.&K. Services Ltd., which provides corporate administration and resident representative services to client companies of Appleby Spurling & Kempe. Copies of Mr. Evans' columns can be obtained on the Appleby Spurling & Kempe website at www.ask.bm.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.