Shareholder primacy: Is there a need for change

  • Date:02 Dec 2014
  • Type:Policy Submission

On 2 December 2014, the Australian Institute of Company Directors provided comments to the Governance Institute of Australia in regard to the discussion paper Shareholder Primacy: Is there a need for change?

The discussion paper considers whether the duty of directors to act in good faith and in the best interests of the company, should be owed to a wider group of stakeholders. Our submission stated that while directors’ duties are owed to the company (meaning shareholders as a whole) Australia’s corporate law currently allows directors to take account of the interests of stakeholders other than shareholders.

 In summary our comments were as follows:

a)     the duty of directors to act in good faith and in the best interests of the company as set out in the Corporations Act does not require amendment;

b)     it is unnecessary to change the law to permit directors to consider stakeholder interests that they can already consider;

c)      the duty to act in the best interests of the company provides flexibility and allows directors to consider and balance the interests of stakeholders. This in turn, promotes effective decision-making and accountability; and

d)     recommending that directors owe a duty to a wider group of stakeholders, is misconceived, unworkable and would be a retrograde step for Australia’s corporate law.

This submission has relevance to directors of all companies regulated by the Corporations Act 2001 (C’th) from small businesses through to ASX listed entities.

To download the policy submission click here (2.34 MB)