Directors' Oversight Responsibility and the Impact of Specialist Skill

Abstract

Listed companies are now required to establish audit committees where at least one audit committee member must have specialist skill. This article examines the impact of the specialist skill requirement on the developing legal principles relating to directors’ oversight responsibility particularly in context of delegation and reliance. This article shows that in countries that have adopted the dual-standard of care, the specialist skill blends in with the imposition of the subjective standard and does not create a new standard. However, it does expose non-executive director to liability due to the fact that audit committee must comprise only non-executive directors. Using collected data of the enforcement activities of the Malaysian stock exchange, this article also shows that while there seems to be not much threat against directors from private enforcement of breach of directors’ duty of care in Malaysia, the oversight responsibility of both executive and non-executive directors is increasingly being enforced by the stock exchange.