Directors responsibility to be diligent in their decisionmaking

There will be continued academic and industry discussion concerning Australian Securities and Investments Commission v Macdonald No. 11 as to whether the judgement rests on the facts of the case, and therefore represents an application of existing law, or whether it represents new law in the area of directors’ duties and responsibilities, the Australian Institute of Company Directors said today.

No matter how the case is interpreted, Australia, generally, has been acknowledged as having an effective world class system of corporate governance and a comprehensive system of corporate law.

In this matter, the law has taken its course and the court has reached a decision. However, the judgement and penalties may be subject to appeal.

AICD does not comment on the circumstances of individual directors or companies, or on matters before the courts, and for these reasons will not be commenting today on the specifics of the case or on the penalties imposed on the individual directors involved.

Regardless of their company circumstances, AICD said that all directors and boards have a responsibility at law to take care and be diligent in their decision-making.

“Board members should apply their individual, considered judgement to matters that are highly significant to the company, especially issues of market sensitivity, and with potential legal implications,” AICD chief executive John Colvin said.

“Good governance is critical to corporate reputation.”

The case also highlights the need for ongoing, quality director education. Directors must keep themselves up-to-date, generally and with the law. They should become familiar with this decision and any appeals which may follow.

AICD will incorporate discussion of the judgement and its implications within its professional development programs for directors, where participants learn the theory, and discuss the practice, of directors’ legal duties and responsibilities.


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Australian Institute of Company Directors (AICD) provides education, information and advocacy for company directors Australia-wide, with offices in each state to cater for 25,000 members. AICD members work in diverse corporations such as small-to-medium enterprises, the ASX Top 200 corporations, public sector organisations, not-for-profit companies, large private companies and smaller private family concerns