Law firm changes non-executive directors policy

Prominent commercial law firm McCann FitzGerald is changing its policy on providing non-executive directors for client firms in the wake of its experience with Parmalat subsidiary Eurofood.

"We will be moving much more cautiously," said Mr Ronan Molony, McCann FitzGerald chairman and managing partner, this week.

Mr Molony described the Eurofood case, where one of the law firm's 64 partners acted as a non-executive director, as a case of "being in the wrong place at the wrong time".

Eurofood was investigated as part of an inquiry into the collapse of Italian food giant Parmalat earlier this year.

"I don't believe anybody was questioning whether our partner was doing anything wrong," Mr Molony said, adding that McCann FitzGerald partners would still "rather not" end up as directors in such cases.

It is possible that the firm will seek to withdraw partners from some existing non-executive directorships as a result of its new policy. Mr Molony said it would be impossible to apply a blanket ban, however.

He said it was natural for a foreign client company to look to its lawyers to help identify an Irish resident to sit on its board and thus satisfy Irish company law.

Mr Molony believes that non-executive roles in such situations (typically with IFSC companies) tend to be too limited to justify the responsibility they carry.

Irish directors will shortly have to sign statements guaranteeing that their company is in "compliance" with all of its obligations.

"Just because a company is in the Fortune 500 doesn't mean it won't have corrupt managers," Mr Molony remarked, adding that it was an "illusion" to think that a non-executive director in a limited role would be able to counteract this.