It really is a case where those earning the very high directors fees draw fire that applies to all, and I’m sure that the legislation was developed with this small group in mind. However it is the wider group that is equally affected by the changes in laws.

I have just resigned from a NFP School Board (after 3.5 years of 30+ hours a month service) for many of the reasons cited. The OH+S liability alone for a Director of a private school is scary. Added to that the possibility that this school may become insolvent and it made no sense to continue to put my family’s assets at risk.

The Government needs to become more aware of the unintended consequences happening in this area.

http://www.youtube.com/resilientfutures#p/u/5/S3Omf2prqA0

I do think the key point you make is right – that community expects a heightened standard for those directors of the largest companies. Yet legally the standard is the same, and this is where the greedy have done a disservice to the many. We may get to such a point that non executive directorship becomes a full time role to discharge the responsibilities and ensure that compliance is met. This will further diminish the talent pool.

Look forward to more on this debate and to your presentation. Could you post the link here for reference for those interested, thanks.

Justin

What you’ve brought into focus is a fundamental question on whether there is / should be a higher duty of care for certain circumstances.

Many of the onerous regulations relate to employee safety and environmental damage. The premise of these is fairly simple – companies should do everything reasonably possible to provide a safe working environment, and also not to degrade public necessities such as drinking water and the like.

This sounds fine on the face of it, however as these laws are set and enforced at the state and territory level, the requirements can vary between locations, hence contributing to the AICD’s stats and their argument on this matter. Of course some states including my home state of WA are resisting getting these laws onto a common footing for various reasons, including some that you’ve raised in your article.

There’s a presumption in these that companies will not take sufficient action unless there’s personal responsibility for directors on these. Unfortunately, I suspect this has actually proven itself to be correct which is a sad reflection on institutional leadership. (My latest speech talks about this and should be up on Youtube soon).

Another case for heightened duty of care is for listed entities, particularly the likes of the ASX 300 which are held by the majority of mums and dads through their superannuation funds, even if they don’t like the company or know that it’s got roguish behavior. In fact, the only way to avoid these companies tends to be to start a self managed super fund and do your own research (very hard to do for most) or not invest in shares at all (not really an option).

Within this context, I have doubts about whether the if-not, why-not (comply or explain) approach is appropriate for certain things – particularly risk management.

I suspect that even more rules or enforcement are around the corner, and if that means listed directors are being even more diligent and cautious then this is a good thing – particularly considering that directors of large companies have been awarded significant pay rises in the past few years, and their justification was due to the additional work required to deal with these matters.

For what its worth, my advice for directors would be to make sure the executives are also on the hook for all of this, and tie it into their remuneration and KPIs.