Tuesday, 4 October 2022

KordaMentha Executive Director David Johnstone and Hamilton Locke Special Counsel John Poulsen recently shared their insights with Governance Institute of Australia’s Governance Directions Journal regarding company directors’ duties in a modern world.

In the article, David and John discuss the changing environment directors are operating in and the increasing community expectations and legal obligations being placed on them. Although the current narrative may be markedly familiar to Australia’s recession in the 80s or the global financial crisis in 2007, David and John suggest there are additional challenges facing directors today. “History provides some lessons about what not to do when managing situational risk. Whilst today’s corporate rules are largely the same, there has been a significant shift about what is considered prudent and balanced governance. This makes the position of directors and officers more challenging than ever before.”

David and John also highlight existing and emerging factors directors must consider, including:

  • Is there adequate awareness and understanding of your statutory and fiduciary duties?
  • COVID can no longer be blamed for ongoing disruptions.
  • Alternative funding solutions must consider duties owed to all stakeholders.
  • Future forecast projections – do not promise the world and deliver an atlas.
  • Environmental, social and governance (ESG) factors – litigation risks and the ability to recapitalise.

For boards to address potential risks and avoid costly mistakes, David and John note it is crucial to maintain knowledge of not only the company, but the concerns of the business community and the industry in which they operate.

Click here to read the article as featured in Governance Institute of Australia’s Governance Directions Journal.