Ofcom, in its decision issued yesterday on whether Sky is a fit and proper person to hold a broadcasting licence, gives a good example of how section 174 Companies Act can be breached by an omission or lack of action by a director. That section requires that a company director “must exercise reasonable care, skill and diligence”.
In assessing James Murdoch’s failure to take meaningful steps to investigate allegations of wrong-doing at the News of the World (i.e. phone hacking), Ofcom observes that:
“…a company director is required to exercise reasonable care, skill and diligence in the exercise of his functions. He may delegate, but has a duty to supervise appropriately. We consider James Murdoch’s conduct, including his failure to initiate action on his own account on a number of occasions, to be both difficult to comprehend and ill-judged. In respect of the matters set out above, in our view, James Murdoch’s conduct in relation to events at NGN repeatedly fell short of the exercise of responsibility to be expected of him as CEO and chairman.”
Ofcom clearly believes that Mr Murdoch’s behaviour and absence of challenge fell short of fulfilment of that duty.