Principles of contemporary corporate governance / Jean Jacques du Plessis, Anil Hargovan, Mirko Bagaric, Jason Harris ; contributors, Vivienne Bath, Irene-Marié Esser, Miko Kamal, Souichirou Kozuka, Jean Nelde Koker, Luke Nottage.
2015
K1327 .D86 2015 (Map It)
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Details
Author
Title
Principles of contemporary corporate governance / Jean Jacques du Plessis, Anil Hargovan, Mirko Bagaric, Jason Harris ; contributors, Vivienne Bath, Irene-Marié Esser, Miko Kamal, Souichirou Kozuka, Jean Nelde Koker, Luke Nottage.
Published
Port Melbourne, VIC, Australia : Cambridge University Press, 2015.
Call Number
K1327 .D86 2015
Former Call Number
Comp 615 D852 2015
Edition
Third edition.
ISBN
9781107432420 (pbk.)
1107432421 (pbk.)
9781316192016 (electronic bk.)
1316192016 (electronic bk.)
1107432421 (pbk.)
9781316192016 (electronic bk.)
1316192016 (electronic bk.)
Description
xxxvii, 563 pages ; 25 cm
System Control No.
(OCoLC)904755931
Bibliography, etc. Note
Includes bibliographical references and index.
Record Appears in
Table of Contents
About the authors and contributors
xviii
Preface
xxiii
Preface to the first edition
xxv
Table of cases
xxvii
Table of statutes
xxxi
Part One Basic Concepts, Board Structures And Company Officers
1.
The concept 'corporate governance' and 'essential' principles of corporate governance (with contributions by Jeanne Nel de Koker)
3
1.1.
The meaning of corporate governance
4
1.1.1.
Generally
4
1.1.2.
Origins of the corporate governance debate and some corporate governance and corporate law theories
6
1.1.3.
Proposed definition of 'corporate governance'
13
1.2.
'Essential' principles of corporate governance
15
1.3.
Is 'good corporate governance' important and does it add value?
18
1.4.
Are corporate governance models converging?
24
1.5.
Conclusion
27
2.
Stakeholders in corporate governance and corporate social responsibility
28
2.1.
Introduction
29
2.2.
Stakeholders in the corporation: An overview
32
2.2.1.
What is a stakeholder?
32
2.2.2.
Discussion of different stakeholders
34
2.2.2.1.
Shareholders
35
2.2.2.2.
Employees
36
2.2.2.3.
Creditors
40
2.2.2.4.
Customers
42
2.2.2.5.
The community
43
2.2.2.6.
The environment
43
2.2.2.7.
Government
50
2.2.2.8.
All stakeholders have vested interests in the sustainability of corporations
50
2.3.
Stakeholders' interests and the corporation: The role of the law
51
2.3.1.
The Australian position
52
2.3.2.
Overseas position: A snapshot
54
2.3.2.1.
OECD
54
2.3.2.2.
European Union (EU)
55
2.3.2.3.
United States
57
2.3.2.4.
United Kingdom
60
2.3.2.5.
Canada
64
2.3.2.6.
South Africa
65
2.4.
Stakeholder interests, good governance and the interests of the corporation: A mutual relationship
67
2.4.1.
General analysis
67
2.4.2.
Case study of James Hardie's asbestos compensation settlement
71
2.4.2.1.
Impetus for corporate restructure
72
2.4.2.2.
Key features of the separation plan
73
2.4.2.3.
Public announcement of the separation
74
2.4.2.4.
Scheme of arrangement and relocation to The Netherlands
75
2.4.2.5.
Jackson Report and its significance
76
2.4.2.6.
Aftermath
79
2.5.
CSR and directors' duties
82
2.6.
Conclusion
86
3.
Board functions and structures (with contributions by Jeanne Nel de Koker)
89
3.1.
Higher community expectation of directors
90
3.1.1.
Initially low standards of care, skill and diligence expected of directors
90
3.1.2.
Legal recognition of changed community expectation of directors
92
3.2.
The organs of governance
94
3.3.
Board functions
96
3.4.
Board structures
105
3.5.
Board structures in the broader context of a good corporate governance model
113
3.5.1.
Overview
113
3.5.2.
Effective board structure
114
3.5.3.
Effective support mechanisms to assist the board in properly fulfilling its functions
116
3.5.4.
Effective statutory provisions
117
3.5.5.
Effective regulators
118
3.5.6.
Effective codes of best practice and conduct
120
3.5.7.
Corporate governance rating systems for companies
122
3.6.
Conclusion
125
4.
Types of company directors and officers (with contributions by Jeanne Nel de Koker)
127
4.1.
Overview
128
4.2.
Definition of 'director'
129
4.2.1.
De jure and de facto directors covered
129
4.2.2.
Shadow director
130
4.2.3.
Nominee directors
132
4.3.
Definition of 'officer'
135
4.3.1.
Statutory definition
135
4.3.2.
Senior employees and senior executives as 'officers'
136
4.3.3.
Middle management as 'officers'?
136
4.4.
Types of company officers
138
4.4.1.
Executive and non-executive directors
138
4.4.2.
Independent non-executive directors
140
4.4.3.
Connected non-executive directors
149
4.4.4.
Lead independent directors or senior independent directors
149
4.4.5.
The managing director, managing directors, the chief executive officer (CEO), executive directors and senior executives
151
4.4.6.
Chairperson
152
4.4.7.
Alternate director
154
4.4.8.
Secretary
155
4.5.
Training and induction of directors
156
4.5.1.
Training
156
4.5.2.
Induction of new directors
159
4.6.
Ethical behaviour by directors
160
4.7.
Remuneration of directors and executives
163
4.7.1.
A controversial and politically sensitive issue
163
4.7.2.
Disclosure of remuneration and emoluments in Australia
170
4.7.3.
Some provisions of the ASX Corporate Governance Principles and Recommendations dealing with remuneration
171
4.7.4.
Further measures to counter excessive directors' and executives' remuneration
172
4.8.
Board diversity
175
4.8.1.
Another controversial and politically sensitive issue
175
4.8.2.
Gender diversity and quota legislation
176
4.8.3.
Quota legislation
177
4.8.4.
Significant recent developments regarding gender quotas at the European Union (EU) level
179
4.8.5.
Future impact of women in the corporate world
183
4.9.
Conclusion
183
Part Two Corporate Governance In Australia
5.
Regulation of corporate governance
187
5.1.
Overview
188
5.2.
Regulation generally
189
5.3.
Objectives in regulating corporate governance
192
5.4.
Sources of regulation in Australia
194
5.4.1.
'Hard law'
195
5.4.1.1.
Statutory regulation - corporate law
195
5.4.1.2.
Statutory regulation - other than corporate law
198
5.4.1.3.
'Corporate governance and the judges' - the place of judge-made law
198
5.4.2.
'Hybrids'
199
5.4.2.1.
ASX Listing Rules
200
5.4.2.2.
ASX Corporate Governance Principles and Recommendations
201
5.4.2.3.
Accounting standards
202
5.4.2.4.
Auditing standards
203
5.4.3.
'Soft law'
203
5.4.4.
The role of market forces
206
5.5.
Towards an effective supervision of financial markets regulatory framework in Australia - analysis
209
5.5.1.
OECD's guidelines for achieving an effective governance framework
209
5.5.2.
Division of responsibilities between the ASX and ASIC
210
5.6.
Conclusion
212
6.
The role of the regulators: ASIC and the ASX
213
6.1.
Introduction
214
6.2.
The Australian Securities and Investments Commission
215
6.2.1.
Overview
215
6.2.2.
Statutory powers under the ASIC Act
216
6.2.3.
The role of ASIC in corporate governance
217
6.2.4.
ASIC enforcement patterns
221
6.3.
The Australian Securities Exchange Ltd
223
6.3.1.
Slow to get out of the blocks
223
6.3.2.
Rapid change in attitude since the end of 2002
224
6.3.3.
ASX Corporate Governance Council's Corporate Governance Principles and Recommendations
225
6.3.3.1.
Changes
225
6.3.3.2.
Structure
226
6.3.3.3.
Recommendations
226
6.3.3.4.
The roles of and relationship between the ASX and ASIC
232
6.4.
Conclusion
234
7.
Accounting governance
237
7.1.
Overview
238
7.2.
Background to the Corporate Law Economic Reform Program and some later developments
239
7.3.
The Corporate Law Economic Reform Program
240
7.4.
Impetus for CLERP 9: Responding to corporate collapses
241
7.5.
Explanation of key CLERP 9 reforms
244
7.5.1.
Audit reform
244
7.5.2.
Corporate disclosure
245
7.5.2.1.
Remuneration of directors and executives
245
7.5.2.2.
Financial reporting
246
7.5.2.3.
Continuous disclosure
247
7.5.2.4.
Shareholder participation
248
7.5.2.5.
Whistleblowers
249
7.5.3.
Miscellaneous reforms
251
7.5.3.1.
Officers, senior managers and employees
251
7.5.3.2.
Enforcement
251
7.5.3.3.
Proportionate liability
251
7.6.
Accounting standards
252
7.7.
Conclusion
253
8.
Auditors and audits (with contributions by Christine Jubb)
256
8.1.
Introduction: The audit role and where it fits into corporate governance
257
8.1.1.
Overview of the audit role
257
8.1.2.
The link between the audit role and corporate governance
259
8.2.
CLERP 9 changes to audit role
260
8.3.
Auditor independence
262
8.3.1.
Overview of rationale behind independence requirement
262
8.3.2.
General requirement for auditor independence
263
8.3.3.
Meaning of 'conflict of interest situation'
263
8.3.4.
Disclosing and resolving conflicts
264
8.3.5.
Specific independence requirements - minimising conflict of interest through employment and financial restrictions
265
8.3.6.
Auditor rotation
266
8.3.7.
Disclosure of non-audit services
267
8.4.
Auditors and the AGM
268
8.5.
Auditors' duties
269
8.6.
Reducing the legal exposure of auditors
270
8.6.1.
Overview of auditors' liability
270
8.6.2.
Registration of audit companies
272
8.6.3.
Proportionate liability
272
8.7.
Qualification of auditors
274
8.8.
Uniform auditing standards
275
8.9.
Audit oversight
276
8.10.
Audit committees
278
8.11.
Conclusion
279
9.
Directors' duties and liability
281
9.1.
Introduction
282
9.2.
Part 9.4B: Civil penalty provisions or pecuniary penalty provisions
286
9.2.1.
Overview
286
9.2.2.
The civil penalty provisions
288
9.2.2.1.
Section 180: Duty of care and diligence - civil obligation
288
9.2.2.2.
Section 181: Duty of good faith - civil obligation
292
9.2.2.3.
Sections 182 and 183: Duty not to use position or information to gain personally or cause detriment to the corporation
293
9.2.2.4.
Part 2E: Duty relating to related party transactions
294
9.2.2.5.
Part 2H: Duty relating to share capital transactions
296
9.2.2.6.
Parts 2M.2 and 2M.3: Duty relating to requirements for financial reports
296
9.2.2.7.
Part 5.7B: Duty to prevent insolvent trading
297
9.2.2.8.
Part 5C: Duties relating to managed investment schemes
301
9.2.2.9.
Chapter 6CA: Duty relating to continuous disclosure
301
9.2.2.10.
Part 7.10: Duty not to be involved in market misconduct and other prohibited conduct relating to financial products and financial services
302
9.2.2.11.
Subclause 29(6) of Schedule 4: Duty relating to disclosure for proposed demutualisation
305
9.2.2.12.
Relief from civil liability
306
9.3.
Case studies regarding civil penalty provisions or pecuniary penalty provisions
308
9.3.1.
Overview
308
9.3.2.
ASIC v Adler [2002] 41 ACSR 72
308
9.3.2.1.
Summary of the facts
308
9.3.2.2.
Contraventions of civil penalty provisions
309
9.3.2.3.
Court orders
313
9.3.3.
ASIC v Macdonald (No. 11) (2009) 256 ALR 199 - James Hardie litigation
313
9.3.3.1.
Background and summary of the facts
313
9.3.3.2.
Legal issues
315
9.3.3.3.
Judicial decisions and the significance of the litigation
316
9.3.3.4.
Court orders
322
9.3.4.
ASIC v Rich [2009] NSWSC 1229
323
9.3.4.1.
Background and basic facts
323
9.3.4.2.
Legal issue
323
9.3.4.3.
The decision and its significance
324
9.4.
Conclusion
329
10.
Enforcement of directors' duties
330
10.1.
Introduction
331
10.2.
The statutory derivative action: Part 2F.1A
333
10.2.1.
The case to introduce a statutory derivative action
333
10.2.2.
Eligible applicant
334
10.2.3.
Cause of action
335
10.2.4.
Leave of court required to institute the statutory derivative action
336
10.3.
Oppressive conduct of affairs: Part 2F.1
337
10.3.1.
Type of conduct covered by Part 2F.1
337
10.3.2.
Who may apply for relief under Part 2F.1?
338
10.3.3.
Nature of relief available under Part 2F.1
339
10.4.
Section 1324 injunctions
340
10.4.1.
Introduction
340
10.4.2.
Section 1324(1)
340
10.4.3.
The court's discretion
341
10.4.4.
Remedies in particular
342
10.5.
Criminal liability of directors
343
10.5.1.
The importance of the criminal sanction in the corporations law
343
10.5.2.
Selected criminal offences directors and other officers can commit under the Corporations Act
347
10.5.2.1.
General
347
10.5.2.2.
Specific offences for breaches of duties
347
10.6.
Conclusion
348
Part Three Corporate Governance In International And Global Contexts
11.
Corporate governance in the United States, the United Kingdom, Canada and South Africa
351
11.1.
Introduction
352
11.2.
United States
353
11.2.1.
Background to the corporate governance debate in the United States
353
11.2.2.
The American Law Institute's involvement in the corporate governance debate
355
11.2.2.1.
Basic aims of the project
355
11.2.2.2.
Impact and importance of the project
355
11.2.2.3.
Some of the key aspects addressed
356
11.2.3.
The Securities Exchange Commission
357
11.2.4.
The Sarbanes-Oxley Act of 2002 - the US response to collapses such as Enron and WorldCom
358
11.2.4.1.
Backdrop
358
11.2.4.2.
Aims and objectives
359
11.2.4.3.
Some perspectives on SOX and its effect
362
11.2.5.
NYSE: Sections 303 and 303A - corporate governance rules
364
11.2.5.1.
Background
364
11.2.5.2.
Summary of the most important NYSE corporate governance rules
364
11.2.6.
The Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (the Dodd-Frank Act)
366
11.3.
United Kingdom (with contributions by Jeanne Nel de Koker)
368
11.3.1.
Background to the corporate governance debate in the United Kingdom
368
11.3.2.
The Cadbury Report and the unfolding of the concept of 'corporate governance' in the United Kingdom
369
11.3.2.1.
Context of the Cadbury Report
369
11.3.2.2.
Code of best practice
370
11.3.2.3.
Further developments
371
11.3.3.
The UK approach to corporate governance
372
11.3.4.
The 2008 UK Combined Code and the 2010 UK Corporate Governance Code
372
11.3.5.
The Stewardship Code
377
11.3.6.
Corporate Governance Code for SMEs
379
11.4.
Canada
380
11.4.1.
Overview
380
11.4.2.
Regulatory environment
380
11.4.3.
Proposed National Policy 58-201: Corporate Governance Principles
384
11.4.4.
Current National Policy 58-201: Corporate Governance Guidelines
386
11.4.5.
National Instrument 58-101: Disclosure of Corporate Governance Practices
387
11.4.6.
National Instrument 52-110 and Companion Policy 52-110CP: Audit Committees
387
11.4.7.
Future direction
390
11.5.
South Africa
392
11.5.1.
Introduction / Irene-marié Esser
392
11.5.2.
The King Report (2009) / Irene-marié Esser
394
11.5.3.
The Companies Act 71 of 2008 / Irene-marié Esser
396
11.5.4.
Corporate social responsibility (CSR) and South African company law / Irene-marié Esser
398
11.5.5.
Shareholder activism: CRISA / Irene-marié Esser
400
11.5.6.
Conclusions on South Africa / Irene-marié Esser
402
11.6.
Conclusion / Irene-marié Esser
403
12.
Corporate governance in the EU, the OECD Principles of Corporate Governance, and corporate governance in Germany, Japan, China and Indonesia / Irene-marié Esser
404
12.1.
Introduction / Irene-marié Esser
405
12.2.
European Union (EU) / Irene-marié Esser
406
12.2.1.
Enhancing corporate governance / Irene-marié Esser
406
12.2.2.
Reflections / Irene-marié Esser
408
12.2.3.
European Corporate Governance Forum (ECGF) / Irene-marié Esser
409
12.2.4.
European Corporate Governance Codes Network / Irene-marié Esser
411
12.2.5.
The EU single market / Irene-marié Esser
411
12.2.6.
Future priorities / Irene-marié Esser
412
12.3.
OECD Principles of Corporate Governance / Irene-marié Esser
413
12.3.1.
Background / Irene-marié Esser
413
12.3.2.
Broad aims and application / Irene-marié Esser
414
12.3.3.
Structure / Irene-marié Esser
415
12.3.4.
Ensuring the basis for an effective corporate governance framework / Irene-marié Esser
416
12.3.5.
Disclosure and transparency / Irene-marié Esser
417
12.3.6.
Conclusions on OECD corporate governance principles / Irene-marié Esser
418
12.4.
Germany / Irene-marié Esser
419
12.4.1.
Background to the corporate governance debate in Germany / Irene-marié Esser
419
12.4.2.
The German Corporate Governance Code / Irene-marié Esser
422
12.4.2.1.
Background to its adoption / Irene-marié Esser
422
12.4.2.2.
Structure and explanatory nature of the German Code / Irene-marié Esser
425
12.4.3.
Employee participation at supervisory board level - codetermination / Irene-marié Esser
428
12.4.4.
The German board structure / Irene-marié Esser
432
12.4.5.
Conclusions on Germany / Irene-marié Esser
432
12.5.
Japan / Irene-marié Esser
433
12.5.1.
Introduction / Souichirou Kozuka Luke Nottage
433
12.5.2.
Historical transformations in Japanese corporate law and practice / Souichirou Kozuka Luke Nottage
434
12.5.3.
Japanese corporate forms and internal governance mechanisms / Souichirou Kozuka Luke Nottage
438
12.5.3.1.
Overview / Souichirou Kozuka Luke Nottage
438
12.5.3.2.
The board of directors and choice in governance structures / Souichirou Kozuka Luke Nottage
440
12.5.3.3.
Directors' duties and derivative actions / Souichirou Kozuka Luke Nottage
443
12.5.4.
Shareholder versus bank finance / Souichirou Kozuka Luke Nottage
447
12.5.4.1.
Overview / Souichirou Kozuka Luke Nottage
447
12.5.4.2.
Takeovers regulation / Souichirou Kozuka Luke Nottage
448
12.5.4.3.
New firms in the IPO market / Souichirou Kozuka Luke Nottage
452
12.5.4.4.
Main banks / Souichirou Kozuka Luke Nottage
454
12.5.5.
Core employees / Souichirou Kozuka Luke Nottage
458
12.5.6.
Conclusions on Japan / Souichirou Kozuka Luke Nottage
460
12.6.
China / Souichirou Kozuka Luke Nottage
462
12.6.1.
Introduction / Vivienne Bath
462
12.6.2.
Government and legislation in China / Vivienne Bath
463
12.6.3.
Corporate entities in China / Vivienne Bath
467
12.6.3.1.
State-owned enterprises / Vivienne Bath
467
12.6.3.2.
Foreign investment enterprises / Vivienne Bath
469
12.6.3.3.
The private sector and companies under the Company Law / Vivienne Bath
470
12.6.4.
Corporate governance - issues and resolutions / Vivienne Bath
473
12.6.5.
Controlling the board of directors and the managers - the supervisory board / Vivienne Bath
474
12.6.6.
Increasing the duties of directors / Vivienne Bath
477
12.6.7.
Independent directors / Vivienne Bath
480
12.6.8.
Committees / Vivienne Bath
481
12.6.9.
Controlling shareholders and protection for minority shareholders under the Company Law / Vivienne Bath
482
12.6.10.
Disclosure requirements / Vivienne Bath
486
12.6.11.
Imposing additional requirements on the sponsors of public offerings / Vivienne Bath
487
12.6.12.
Higher standards of accounting and internal control - Basic Norms for Internal Control of Enterprises / Vivienne Bath
488
12.6.13.
Direct intervention - the case of dividends / Vivienne Bath
489
12.6.14.
Enforcement / Vivienne Bath
490
12.6.15.
Consequences of breach / Vivienne Bath
491
12.6.16.
Conclusions on China / Vivienne Bath
494
12.7.
Indonesia / Vivienne Bath
496
12.7.1.
Introduction / Miko Kamal
496
12.7.2.
The national code of corporate governance / Miko Kamal
496
12.7.3.
The Indonesian two-tier board model / Miko Kamal
497
12.7.3.1.
The general meeting of shareholders (GMS) / Miko Kamal
498
12.7.3.2.
The dtreksi / Miko Kamal
499
12.7.3.3.
The dewan komisaris (board of commissioners) / Miko Kamal
500
12.7.4.
Corporate governance 'champions' in Indonesia / Miko Kamal
501
12.7.4.1.
Banking companies / Miko Kamal
501
12.7.4.2.
State-owned enterprises / Miko Kamal
502
12.7.4.3.
Insurance companies / Miko Kamal
503
12.7.5.
Some core features of the Indonesian corporate governance model / Miko Kamal
503
12.7.5.1.
Independent commissioner/s / Miko Kamal
503
12.7.5.2.
The supporting committees of the dewan komisaris / Miko Kamal
504
12.7.5.3.
Internal and external auditors / Miko Kamal
505
12.7.5.4.
Risk management / Miko Kamal
506
12.7.5.5.
Business ethics and anti-corruption / Miko Kamal
507
12.7.5.6.
Sharia supervisory board / Miko Kamal
507
12.7.5.7.
Some additional requirements for members of direksis / Miko Kamal
508
12.7.6.
Conclusion on Indonesia / Miko Kamal
508
12.8.
Conclusion / Miko Kamal
509
Part Four Shareholder Activism And Business Ethics / Miko Kamal
13.
Shareholder activism / Miko Kamal
515
13.1.
Introduction / Miko Kamal
516
13.2.
What is shareholder activism? / Miko Kamal
518
13.3.
What attracts shareholder activism? / Miko Kamal
519
13.4.
Does shareholder activism add value? / Miko Kamal
520
13.5.
Characteristics of shareholder activism / Miko Kamal
521
13.6.
Internal activism / Miko Kamal
523
13.6.1.
Overview / Miko Kamal
523
13.6.2.
Obtaining information / Miko Kamal
523
13.6.3.
Convening members' meetings / Miko Kamal
524
13.6.4.
Distributing information to members / Miko Kamal
525
13.6.5.
Voting at a members' meeting / Miko Kamal
525
13.7.
Court action / Miko Kamal
526
13.7.1.
Individual actions / Miko Kamal
526
13.7.2.
Class actions / Miko Kamal
528
13.8.
Case studies / Miko Kamal
530
13.9.
Conclusion / Miko Kamal
533
14.
The ethical obligations of corporations / Miko Kamal
534
14.1.
Introduction - the nature of morality / Miko Kamal
535
14.2.
The threshold issue: Is there a role for ethical considerations in business? / Miko Kamal
540
14.2.1.
A brief look at the short history of business ethics / Miko Kamal
540
14.2.2.
The disunity between business and ethics argument / Miko Kamal
543
14.2.3.
Morality applies to business because moral judgments are universalisable / Miko Kamal
544
14.2.4.
Are moral norms too vague to apply to business? / Miko Kamal
545
14.2.5.
Summary of the general link between business and ethics / Miko Kamal
545
14.3.
Application of moral principles to a business setting / Miko Kamal
546
14.4.
Conclusion / Miko Kamal
548
Index / Miko Kamal
549