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It stems from a growing “expectation gap” that has emerged across the Australian community, ranging from letters to the editor, lectures and papers, to significant recent judgements on directors’ duties, as well as calls for reform by thought leaders in this arena.
This expectation gap was first referred to by senior company director John Ralph AC FAICD (Life) in his foreword to Chairman of the Board – a Role in the Spotlight, published by the Australian Institute of Company Directors in 2006.
In 2010, debate on the role of directors was reignited following a series of lectures entitled “The Role and Duties of Australian Company Directors: a Restatement” by Dr Robert P Austin, at the TC Bierne School of Law, University of Queensland. It was Dr Austin, in his former role as a judge of the Supreme Court of New South Wales, who delivered a seminal decision on directors’ duties in Australian Securities and Investment Commission v Rich.
In his lectures, Dr Austin reviewed the current law on the duties and liabilities of directors and argued that there is a pressing need to clarify, and even codify, the basic legal position for directors’ duties and liabilities.
A number of other reviews and reports over recent years have also called for reform.
Ultimately, the fear is that as this expectation gap grows, especially among judges, parliamentarians and the media, NEDs will be cornered into an untenable position where “you’re damned if you do, damned if you don’t”.
Our society needs company directors, but this growing expectation gap does not help them serve the boards they are dedicated to serving on.