NON-EXECUTIVE directors (NEDs) owe a duty of care to the company to which they are appointed. In recent years, they have attracted greater scrutiny because of the increasing importance of their roles as watchdogs to monitor the conduct of management. Unfortunately, this has brought with it more litigation where NEDs have been sued for breaching their duty of care.

What responsibilities come under this duty of care? And what considerations - for example, risk versus reward - should prospective or incumbent NEDs take into account? Given that the NED typically has principal commitments outside the company, the dilemma is knowing how closely to monitor the activities of the company to properly discharge his or her duty. A recent legal case may help shed some light on this.

Late in December, the Singapore High Court had to rule on whether two nominee directors (a category of non-executive director) had breached their duty of care. It was undisputed that the two directors had not been aware of the terms of the company's business contracts and had not supervised its delegates. Notwithstanding this, the court ruled that they had not breached their duty of care.