Corporate governance in Australia has been impacted significantly in recent years as a result of the James Hardie (and associated) legal case. It all stems back to 2001 when the (then) board of James Hardie approved an ASX announcement that was subsequently found to be misleading. ASIC prosecuted, and the board was found guilty and penalties imposed.
Astute company secretaries and directors have closely followed these cases as they have changed the corporate governance landscape. Books will be written on all the impacts on board meetings and other aspects of governance; however it is worth being reminded of three of the more significant recent lessons:
1. Accurate minute taking is essential, as is the requirement that they be reviewed within the one-month period as allowed in s251A of the Corporations Act 2001.
2. Practices for meetings involving directors attending via technology have been clarified. Of particular importance are three things:
a. The need to renew the consent of all directors giving for such meetings whenever the composition of the board changes;
b. A meeting will not be deemed to have been ‘held’ unless every director is able to hear and participate in all aspects of the meeting;
c. Also, the meeting will not be considered ‘held’ unless every director has access to all documents of the meeting.
3. Formality in decision-making is critical, per Barrett JA in Gillfillan v ASIC (2012):
‘Value is often attached to collegiate conduct leading to consensual decision-making, with a chair saying, after discussion of a particular proposal, ‘I think we are all agreed on that’, intending thereby to indicate that the proposal has been approved by the votes of all present. Such practices are dangerous unless supplemented by appropriate formality.
The aim is not to consult together with a view to reaching some consensus, although it may well be, as a practical matter, that such consultation facilitates the making of the decision that is ultimately required. The aim is rather that the members of the board should consult together so that individual views may be formed and the individual will of each member may be make known in a clearly communicated way.’
As Chairs, Company Secretaries and Directors it is important to take time to reflect on your current board practices, to ensure that they are in line with current best practice.
The Avondale Business School can help you with your Governance and Compliance requirements – find out how by contacting Warrick Long at the Avondale Business School.
P: 02 4980 2168