INTRODUCTION
There have been some remarkable corporate collapses in Australia since the beginning of the 21st century, for instance, the failures of Tel.One and HIH Insurance. It is alleged that the collapses of these two companies was due to their poor corporate governance practices. These incidents have raised a question about the current corporate governance practice in Australia. This article is going to examine this issue in particular regarding to the concept and standard of director’s duty of care, skill and diligence (hereafter referred as “duty of care”).
PART 1
The duty of care is a central element in the legal regulation of corporate governance. The duty of care is one of many duties that are owed by a company director to the company.
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The phrase ‘reasonable person’ indicates that this test is an objective test. Therefore, some objective elements, like a director’s personal skill, knowledge and experience should be taken into account generally. Furthermore, in ASIC v. Rich, the court dictated several elements to be taken into consideration when determining whether a company director has breached his duty. These elements include the type of the company, the size and nature of its business, the terms of its constitution, the composition of the board, the distribution of work and responsibility between executives and the board members, and whether or not the company is controlled by a parent …show more content…
Daniels was confirmed on appeal in Daniels v. Anderson. It is shaped by the circumstances of both the directors involved and the company, but does not take into account the limitations of an individual director’s knowledge or experience. Furthermore, the NSW Court of Appeal stated the modern principles regarding the performance expectation of company directors. Therefore, as a general rule, a company director should acquire at least a basic understanding of the business of the company and should become familiar with the fundamentals of the business. Director may not shut their eyes to corporate misconduct and then claim that because they did not see the misconduct, they did not have a duty to look. However, directorial management does not require a detailed inspection of day-to-day activities, but rather a genral monitoring of corporate affairs and policies. Accordingly, a director is well-advised to attend board meetings regularly. While directors are not required to audit corporate books, they should maintain familiarity with the financial status of the corporation by a regular review of financial statements which may give rise to a duty to inquiry further into matters revealed y those statements. If a director feels that he or she has not had sufficient business experience to qualify them to perform the duties of a director, they should either acquire the knowledge by inquiry, or fuse to
This decision was made in good faith and cannot be conspicuously construed to have self-interests veiled in them. Further, the executive directors made an informed decision to refrain from passing this information to the board and they did believe that this would be in the best interests of the company as disclosure would have brought an end to the company’s existence much before the actual downfall. Thus this judgment met all the requisites prescribed under the provisions of Section 180 (2) of the Corporations Act, 2001 (Rawhouser, Cummings and Crane 2015). This case was the first to comprehensively lay down the business judgment defense and apply it to the facts and circumstances of a case. This defense would negate the apparent breach of the duties of the directors as prescribed by the statute and under common
Western Australian Department of Education. (2007). Duty of care for students. WA: Department of Education. Retrieved from http://www.det.wa.edu.au/policies/detcms/portal/
What ethical principles were impacted? What was the ethical duty of care to Lewis? How was it breached?
Duty of care is legal obligation to ensure the well-being of a service user, safeguard service users from harm while they are in your care.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
As a consequence of the separate legal entity and limited liability doctrines within the UK’s unitary based system, company law had to develop responses to the ‘agency costs’ that arose. The central response is directors’ duties; these are owed by the directors to the company and operate as a counterbalance to the vast scope of powers given to the board. The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company. It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves. The counterbalance to this concern is S175 Companies Act 2006 (CA 2006) this acts to prevent certain conflicts arising and punishes directors who find themselves in this position. Furthermore, there are specific provisions within the CA 2006 that empower third parties such as shareholders to influence directors’ remuneration.
In effect Salomon's principle as confirmed by Macaura v Northern Assurance Co. and Lee v Lee's Air Farming Ltd. helps form an image of a corporation as a 'depersonalised conception'[5], an object that is 'cleansed and emptied of its shareholders. '[6] Yet the concept of an incorporated company as a separate legal person causes some difficulties, for surely all 'legal personality is in a sense fiction'.[7] Questions soon arise ... ... middle of paper ... ...
Supervision Outside of Normal School Hours The duty of care extends to children not only during school hours but also outside of school hours where the students are on school property. It is common practice for parents to leave pupils at the school before hours or collect them after hours, and in that acceptance, is the obligation of the school to provide supervision. This is something which needs serious consideration in my own context as some students arrive on the premises thirty minutes before school starts. The school’s liability could be extended if it habitually assumes responsibility for its pupils beyond the limits of the school day or has given rise to an expectation of supervision prior to opening time, or beyond closing time.
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
The end of 2001 and the start of 2002 saw the end of a period of magnified share prices and booming businesses. All speculations of misrepresentation came to light and those firms which once seem unconquerable were now filing for bankruptcy. Within this essay, I shall discuss the corporate governance mechanisms and failures which led to the Enron scandal resulting in global corporate governance reforms being encouraged.
In today’s business world, people are sometimes torn between their commitment to their employer and their commitment to their friends. This internal struggle has the potential to lead to unethical business practices that can cost companies millions. Because of unethical business practices by employees, some corporations feel they are limited in their sense of duty to their employees, while others, like Malden Mills, believe loyalty to employees goes beyond a simple pay check, they feel they have a duty of care to their employees that treat them like family. In this essay, I present my perspective of what the nature and scope of care mean. I will then follow this up with what I feel are the characteristics of care are and to what extent employers
The board of directors has both executive and non executive directors. Executive directors have both executive and board duties to perform while non executive directors have only board responsibilities. Therefore both types of directors vary in the responsibilities and authority they have in the company affairs. Thus the non executive directors devote very little time to company affairs ( only attend board meetings, committee meetings of which they are members or sometimes pay a visit to the company premises for getting knowledge of how things are done).
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.