The Post Office scandal has highlighted the urgent necessity for company boards to exercise responsible oversight of legal risks, as stated by the Institute of Directors (IoD).
The Horizon inquiry unearthed substantial evidence of excessive reliance on legal advice during the Post Office’s management, leading to significant miscarriages of justice. The IoD argues for amending the UK Corporate Governance Code to delineate explicit legal risk responsibilities for designated board committees. Such committees should regularly report on litigation, disclosures, investigations, and regulatory responses.
Findings from the inquiry indicated the irresponsible conduct of legal professionals at Post Office Ltd (POL), where legal privilege was frequently misused to withhold crucial information from the board. According to one working group member, POL’s legal team habitually shielded key documents, such as the 2016 Swift review, from board scrutiny under the guise of legal privilege.
Echoing the IoD’s perspective, the inquiry emphasised that directors must make independent decisions rather than defer excessively to their legal advisors. While legal advice is invaluable, directors should apply independent judgement and moral reasoning, ensuring comprehensive access to all relevant data when making strategic decisions.
Dr. Roger Barker, director of policy and corporate governance at the IoD, underscored that the scandal’s roots lay more in the governance and management failures than in the Horizon software itself. He suggested that these governance failures might not be fully manageable through regulation but could be addressed with directors possessing essential knowledge and skills.
The Post Office saga underscores a critical lesson for directors: while legal advice is pivotal, board members must utilise their independent judgement and ensure robust oversight of legal risks to prevent future governance failures.
