Benefits and risks of recruiting specialist directors to your board

For specialists who come to a board without the senior management or governance expertise of other board members, it can be a steep learning curve.

For boards that include non-executive directors, finding members with the right skills, perspectives and experience is key. Typically, that means people with senior management backgrounds in the relevant sector or core governance expertise in law, finance and accounting, or risk management. But many boards also add people with specific expertise to the mix.

Specialist directors are well accepted in many sectors, including those where scientific, technical or clinical knowledge is at the centre of an entity’s operations. Specialist directors can also include people who bring important social knowledge, such as lived experience as a person with disability or a First Nations perspective. Or they may be elected or appointed to represent particular stakeholders, such as students on a university council, or employer or employee groups on industry superannuation fund boards.

Whatever their background, specialist directors and their board colleagues need to understand what the law requires of them and how specialists contribute to the board’s broader work. Some clear principles emerge. First, the specialist is expected to bring and contribute their expertise at the board table. Second, they cannot limit their engagement to questions touching their specialist field and opt out of their broader responsibilities. Third, the presence of a specialist on the board does not allow other directors to abdicate responsibility for informing themselves and engaging with the issues in that domain.

Specialists’ duty of care

Specialist directors, like all directors, owe a duty of care to the corporation. Accordingly, they must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in the corporation’s circumstances and occupied the office held by —  and had the same responsibilities within the corporation as — the director. 

In ASIC v Maxwell [2006] NSWSC 1052 at [101], Justice Brereton explained that the circumstances include “the composition of the board, the director’s position and responsibilities within the company, the particular function the director is performing, the experience or skills of the particular director, the terms on which he or she has undertaken to act as a director, the manner in which responsibility for the business of the company is distributed between its directors and its employees, and the circumstances of the specific case”.

The “experience or skills of the particular director” are important. As Justice Beach recently said in Pacific Current Group Ltd v Fitzpatrick [2024] FCA 1480 at [180], the “reasonable person” in the test is “an ordinary person who possesses the knowledge and experience of the relevant director”. 

ASIC v Maxwell states that directors “are not required to exhibit a greater degree of skill in the performance of their duties than may reasonably be expected from persons of commensurate knowledge and experience, in the relevant circumstances”. Role clarity is important. Usually, their duty is not to act as the company’s specialist adviser, but rather to apply their unique knowledge and experience to the responsibilities they have as a director.

The second principle is that a specialist cannot limit their engagement as a director to questions within their specific domain.

In ASIC v Healey [2011] FCA 717 — the directors’ duties case arising out of misstatements in the 2007 accounts of the Centro Group — Justice Middleton said, “A director, whatever his or her background, has a duty greater than that of simply representing a particular field of experience or expertise. A director is not relieved of the duty to pay attention to the company’s affairs, which might reasonably be expected to attract inquiry, even outside the area of the director’s expertise.”

This goes to the “irreducible core” of a director’s duty of care. In GJB Building Pty Ltd v AI&PB Property Pty Ltd [2023] VSC 782 at [2030], Justice Nichols said, “It is important to pay attention to the ‘irreducible core’ of a director’s duty which will invariably apply to all directors in any corporation and in any circumstances.” That obligation extends to specialists.

The rest of the board

The third principle concerns the rest of the board. It can be tempting to think that including a specialist — for example in information technology — means the rest of the board can relax, relying on that specialist to keep watch over areas outside the others’ comfort zone. But the position is more nuanced than this, as the Centro case demonstrates.

Non-executive directors necessarily rely on their fellow board members — along with executives and independent external advisers — in carrying out their responsibilities. But this is not the same as abdicating responsibility for whole areas to the specialist, without taking the time to obtain and apply sufficient knowledge to make an independent assessment of the specialist’s contribution.

Section 189 of the Corporations Act 2001 (Cth) deals with reliance on others. It applies when the reasonableness of a director’s reliance on information, or professional or expert advice, arises in proceedings brought to determine whether a director has performed a duty under Part 2D.1 of the Act or an equivalent general law duty. It covers information or advice provided by another officer in relation to matters within their authority, or by a board committee on which the director did not serve.

That is taken to be reasonable only if the reliance is in good faith, and “after making an independent assessment of the information or advice”. As Justice Nichols notes in GJB Building, “A director is not excused from making her or his own inquiries by relying on the judgment of others.”

Specialists can help contribute to what Justice Beach described in Pacific Current Group as “an operative and direct intellectual diversity as between the individuals” on a board. But it is important to understand that they are directors first and specialists second.

This article first appeared under the headline 'Directors' Counsel’ in the May 2025 issue of Company Director magazine.