Serving as a company director can be perilous. But for an investor, not taking up such a role is often worse.

Recently a friend discussed with me a private business he had backed. Things had gone wrong – as they so often do – so my friend had stepped down from the board, perhaps for fear of tarnishing his reputation. The executive directors who remained then proceeded to stitch up a cosy deal with a friendly insolvency practitioner, and buy the business back in a pre-pack administration. My friend was left with nothing. This is what happens if you have ownership without stewardship.

Unfortunately this type of incident is all too common. I can never understand why banks and bondholders provide the vast proportion of the capital, relative to the equity component, for so many highly leveraged companies, yet enjoy no board representation. They have most at risk – but only negative rights, usually exercisable after the event.