Setting your Tone from the Top
Company boards, and individual directors, are finding it necessary, increasingly to take advice on matters of corporate governance. Each year more laws are added making directors personally liable for the action of their companies.
In the current environment directors seeks advice on the three big areas of personal liability: insolvency, breach of the duty of good faith and breach of the duty of care and diligence (including navigating the ‘business judgment rule’). Increasingly, though, they are also seeking advice on managing risks associated with industrial manslaughter, workplace health and safety, antidiscrimination, whistleblowing, environmental compliance, ESG, intellectual property, competition law, cyber security, data management and breach reporting, international anticorruption legislation and compliance with modern slavery laws.
Inappropriate or inadequate management of conflicts of interest is the most common of the concerns that arise for advice within the duty of good faith. Understanding and navigating the ‘business judgment rule’ is one of the most commonly arising concerns in complying with the duty of care and diligence.
Directors of charities and not-for-profits are generally not exempt from these concerns. In fact the additional complexity added through pursuing a purpose ratehr than simply a profit can compound the challenges without reducing the risk. One of the largest cases on director’s personal liability in Australiua arose out of the insolvency of the National Safety Council which was a not for profit. The chairman of the board was found personally liable for in excess of $100 million dollars. This is volunteer protection legislation in some states and we can assist directors to identify the extent to which that legislation may provide relief.
Company directors must be aware not only of their legal obligations but also of the ethical and cultural context in which the legal issues arise. We are attuned to this. Our legal advice is likely to be located in a broad sociocultural context that is alive to these broader concerns.
If you have concerns about your corporate governance, the way that your board is responding, or not responding to challenges, or the financial state of your corporation, please contact us.
Some of the corporate governance services we provide include: