Opinion: The Post Office & ‘joint and several liability’

Jan 26 / Nick O'Sullivan

Having been asked to speak about ethical leadership at a regional CMI event, I was not short of material. It’s something I had already spent a lot of time investigating, researching and seeking to understand. It’s also something I had a view on (and interest in) as a result of my own experiences. However the Post Office scandal hitting the UK headlines in early 2024 meant it was a hot topic for many. So I had lots to consider, and I knew that many would have their own view. But one thing that did begin to concern me was that, if we weren’t careful, we may not learn the full lessons.

For those not in the UK (or indeed for those in the UK but who never look at the media), the Post Office Ltd has been in the spotlight a little recently. The Post Office had been a British institution and much loved. However, in the late 90’s they implemented a new IT system. The system was flawed, generated false reports indicating losses in hundreds of sub-post offices and, as a result, led to hundreds (potentially thousands) of Sub-Post Masters having to pay their own money to make good shortfalls that never actually existed, with many gaining a criminal record for theft and/or false accounting, some losing their homes, some becoming publicly shamed, some going to prison and even some taking their own lives – all of these things having devasting impacts on the individuals and their families.

Unfortunately in that time, many lives have had to progress under the impact of false prosecutions. Tragically, some of these prosecuted have not lived to see justice be done. Indeed one could question whether justice for some of the impacts resulting from the scandal could ever truly be provided.

There is of course more to this story, but the above sets the key context for those unfamiliar with it. At the time of writing, an inquiry into the whole affair is ongoing, and I do not wish in anyway to try and anticipate their findings. However, as a curious person who thinks a lot – especially about leadership and management issues and how they impact people – there is a lot to consider here about how we tend to react to such events and what the impact of our reactions may be.

So much so, that she volunteered to return her CBE (a significant national honour in the UK) following a public petition signed by over 1.2 million people. However, between her leaving the Post Office as CEO and the headlines of early 2024, she went on to hold numerous other senior positions at large companies. Something that only serves to, understandably, increase the strength of feeling around the whole affair.

From what I have been able to find out, and based on what I understand of corporate governance and leadership, I have little doubt that the leadership at the Post Office had a significant role in the events surrounding the scandal. It will be very interesting to see what the inquiry into the scandal reveals. But in times like this, I worry that the lure of having such an easy scapegoat may prevent much of the British public from learning about how companies work and where some of the root causes may actually lie. My concern is that should that be the case, then arguably those who most need to sit up, take notice and raise standards going forward may escape the need to do so. Should that occur, it seems that such miscarriages of justice could easily happen again. Let me explain.

The responsibilities of Directors is enshrined in UK law. UK legislation, namely the Companies Act 2006, states that Directors have a duty to “promote the success of the company”. This includes considering long-term consequences of a decision, “the interests of company employees”, “the impact of the company’s operations on the community and environment”, “the desirability of the company maintaining a reputation for high standards of business conduct”, and the need to act “fairly as between members of the company”. We can see most of these topics being relevant to the Post Office scandal. Failure to uphold these things is a failure of duty to act as a Director. Directors are also, typically, ‘jointly and severally liable’ for the business which they are Directors of – meaning that the Board fails in its duties, all Directors are accountable.

In my mind, as I reflected on it, this prompts all sorts of questions.

Why weren’t the Directors asking more questions? Did they, for such a prolonged period and despite continual challenges, continue to just take the assurances of the software provider (Fujitsu) and/or the CEO?

Or alternatively, could they have been the ones who, fixating on their duty to consider the reputation of the business in the short term, failed to consider their duty to the employees and the business in the long term? Could they be the ones who encouraged, perhaps even directed, the CEO to make sure the Post Office were not exposed by Horizon despite the mounting evidence?

In an article in The Times on Saturday 13 January 2024 a Non-Executive Director, who worked with Paula Vennells on the Board of Morrisons supermarket following her time at the Post Office, is quoted as saying of her, “I would say that her flaw is that she’s got a deference for authority. At Morrisons she was more a cheerleader for the management than doing the role she should have done.”

Now I’ve never met Paula to form my own view, and I’m never likely to. So this view from someone who has is about as close as I’m likely to get. While I have to acknowledge that it is just one observation, from one individual, and one made in the context of the current headlines, it is nonetheless a potentially interesting one. This is because while the CEO is the top dog within the Executive (those who actually run a business day-to-day) they are not the highest authority in a company. That position falls to the Board of Directors, as the body that hold the Executive, including the CEO, to account. I know this because a lot of my work is with Executive Teams and Boards and so it’s a relationship I work with and navigate all the time in numerous businesses. A CEO that is also keenly aware that they are answerable to their Board, and who may have a level of deference toward them, could perhaps be more susceptible to following their direction and not taking a stand where such direction from the Board is questionable.

This means that one of two broad scenarios may have applied:

The CEO was leading the Post Office’s rebuttal of the Sub Post Masters allegations of wrong doing and the Board of Directors may not have challenge the CEO enough; or
The Board of Directors were potentially complicit in prioritising the reputation of the business and steering the CEO to take such a stance, which they then did – perhaps in part out of deference to the higher authority of the Board.

Either way, before we rush to associate the whole affair as the result of a handful of easily identifiable people, there are questions that need to be answered about the role of the Directors. I for one will be very interested to see what the inquiry uncovers.

Whatever the outcome, in order to help ensure such awful tragedies as those that resulted from the Post Office scandal are to be avoided in the future, I hope everyone in a leadership position, including myself, takes the opportunity to look in the mirror and remind themselves of the roles Directors – indeed all leaders – are required to play. And most importantly of the courage they need to have to protect those they are there to serve. That includes the courage not to hide behind an easy scapegoat.