The Lord Mayor of London is to make a plea to the government for a limit on the liability of non-executive directors, revealed a report.
Speaking to a meeting of captains of industry, and trade and Industry Secretary Patricia Hewitt at Mansion House, the Lord Mayor will warn that the combined code on corporate governance, toughened up by Sir Derek Higgs, has placed a heavy burden on non-executive directors.
"With the exception of fraud by one of them, they do need some sort of protection against the unlimited liability against which they often cannot insure," said Alderman Robert Finch.
According to the report, the Lord Mayor will argue that the lawsuits against the non-executive directors of Equitable Life is a massive disincentive to those who might otherwise have contemplated joining boards.
He said this problem was heightened by the increasing difficulty in obtaining insurance against liability.
Finch will argue that the emphasis placed on the importance of non-executive directors following the Higgs report has damaged the necessary trust between executive and non-executive directors, said the report.
"Current levels of personal liability are untenable for this reason alone," the Lord Mayor will say.
He will urge the government to consider the example of the French who recently passed a law limiting the liability of directors to two years' salary and fees, the report concluded.
