Plinio Shiguematsu (Instituto de Ensino e Pesquisa (INSPER)) has posted Who Is Responsible for Corporate Ignorance? Mission-Critical Risk and Corporate Information Systems in UK Company Law on SSRN. Here is the abstract:
UK company law contains the elements of a duty to organise corporate knowledge but has not assembled them into a usable doctrine. Section 174 of the Companies Act 2006 establishes an objective-subjective standard of care. Re Barings plc (No 5) requires directors to acquire sufficient knowledge of the company’s business and supervise delegated functions. The UK Corporate Governance Code 2024 now requires boards to monitor their risk-management and internal-control framework and to declare the effectiveness of material financial, operational, reporting, and compliance controls. Yet courts still lack a method for deciding which director was responsible when material information existed inside the company but failed to reach the board.
This Article develops such a method for mission-critical risk. Its premise is that the law should evaluate corporate information systems without creating a free-standing guarantee against corporate harm. The seriousness of a risk determines how structured and reliable the information system should be; the director’s actual functions determine the scope of individual responsibility; and liability requires an identified defect in generation, validation, transmission, escalation, or response, evaluated ex ante. The framework draws limited comparative lessons from Delaware’s post McDonald’s officer cases and Brazil’s 2024 Brumadinho decision, in which the securities regulator sanctioned the Vale director responsible for dam safety while acquitting the chief executive. Those decisions are useful not as rules for transplantation, but as demonstrations of responsibility-sensitive attribution.
A court may treat a company’s own identification of material controls, responsibility map, reporting cadence, exception criteria, and effectiveness assessment as evidence of the process reasonably expected from the relevant directors. The proposed six-stage inquiry separates risk, responsibility, information obligation, defect, fault, and remedy. It therefore occupies the space between two errors: judicial management of business strategy and legal indifference to organised ignorance.
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