Gwyn Roberts

28/09/2011 Author: Gwyn Roberts

Editor's view: 28 September

Cayman’s Weavering judgement is the shot that was heard around the world. Or, at the very least, the loud bang that woke-up a number of slumbering hedge fund directors.

Yet despite the significant noise created by Justice Andrew Jones’s decision, the ruling isn’t quite as monumental as it might first seem. The fine meted out to Peterson and Ekstrom is certainly great, but the actual text of the 37-page document will not, on its own, automatically improve standards of corporate governance.

The difficulty here is that so much of the ruling is based on the specifics of this one case. Yes, the judgement and its recommendations are useful. But boards, and hedge funds, would make a serious error if they were to use Jones’s reasons for the delinquency of Weavering as a tick-list or DDQ for how a director should behave.

As one legal counsel made clear to me, the judgement should not be seen as a flak jacket for boards. In fact, Weavering MK II – and unfortunately at some point there will be a similar collapse of corporate governance – will be different, meaning those holding up the case as an example of how to act, or not to act, are liable to come unstuck.   
The Cayman decision is not a magic bullet, but a wake-up call that highlights the need for boards to devote more time to fiduciary responsibility. A Cayman court has shone a light on part of the problem, now it is up to all of us to address the remaining deficiencies in standards.

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