This chapter begins by introducing the concept of corporate governance, and the regulatory role of directors’ duties. An appreciation of corporate governance methodologies gives context to the ‘hard law’ of directors’ duties. The chapter then considers who falls within the definition of director, the role of the director within the company, and how that role attracts legal and non-legal regulation. It also identifies who, beyond directors, can also be subject to directors’ duties. The chapter revisits the history of directors’ duties within Australian corporate law, building on the historical context provided by Chapter 1, and exploring the interrelationship between the duties applicable at common law, in equity, and according to statute. It concludes with the consequences of breach of the civil penalty provisions and options for exoneration and relief under the Corporations Act.

First, this chapter canvasses the history of the fiduciary obligation as it applies to the director–company relationship. The fiduciary obligation includes two duties: a duty of loyalty and a duty to account for benefits gained—more informally termed the ‘no conflict’ and ‘no profit’ rules. This chapter then discusses examples of the ‘no conflict’ and ‘no profit’ rules from case law, and the modern exceptions to this general principle on the basis of commercial realities, such as the business opportunity rule. It then considers ss 182–3 of the Corporations Act which deal with a director’s misuse of information or position to gain an advantage for themselves or others, or to cause detriment to the company. While there is a clear relationship between these sections and the ‘no profit’ rule, they have developed differently since enactment as legislative provisions. This chapter then considers the requirements for directors to disclose their material personal interests under ss 191–195, and the inconsistent treatment of the disclosure requirements with the ability of a fiduciary to seek the fully informed consent of the company in general meeting. Finally, this chapter considers the protection afforded to members of a public company under ch 2E of the Corporations Act for related party transactions.

The rise in the use of AI in most key areas of business, from sales to compliance to financial analysis, means that even the highest levels of corporate governance will be impacted, and that corporate leaders are duty-bound to manage both the responsible development and the legal and ethical use of AI. This transformation will directly impact the legal and ethical duties and best practices of those tasked with setting the ‘tone at the top’ and who are accountable for the firm’s success. Directors and officers will have to ask themselves to what extent should, or must, AI tools be used in both strategic business decision-making, as well as monitoring processes. Here we look at a number of issues that we believe are going to arise due to the greater use of generative AI. We consider what top management should be doing to ensure that all such AI tools used by the firm are safe and fit for purpose, especially considering avoidance of potential negative externalities. In the end, due to the challenges of AI use, the human component of top corporate decision-making will be put to the test, to prudentially thread the needle of AI use and to ensure the technology serves corporations and their human stakeholders instead of the other way around.

Historically, the power to manage the business of all companies and corporations was conferred upon the board of directors. The fact that it was impossible for a board of directors to manage the day-to-day business of large public corporations was only openly acknowledged in the past three decades. This chapter focuses on the organs of a company and then discusses the main functions of a board of directors. It is clear that there is an important distinction between managing the business of the company and directing, supervising and overseeing the management of the business of corporations in large public companies. The board is responsible for directing, supervising and overseeing the management of the business of corporations. Managing the business of large public corporations is normally left to management, but under control of the board.

In the previous chapter we saw that modern community expectations require that all types of directors fulfil their duties of care and diligence meticulously. No longer may directors hide behind ignorance or inaction; nor are the duties of non-executive directors seen as being of an intermittent nature. All directors have a positive duty to challenge, inquire and investigate when controversial or potentially risky matters are discussed at board level. In this chapter we see that there are various types of company directors and officers, although the basic position is that the law will expect the same duties of all directors and that senior employees and senior executives owe duties to the company comparable to those of directors.

US academic discourse on director interlocks isn’t new. Yet, the increased attention to common ownership has also brought to light the increased tendency of interlocked directors to serve in the same industry. I termed these directors as horizontal directors in my earlier work – shining a light on the benefits they bring to investors and companies but also the risks they pose to corporate governance and antitrust law. This chapter further revisits the prevalence of horizontal directors, armed with six additional years of data, and shows that the prevalence of horizontal directors has remained steady, even as attention to common ownership has increased in recent years. These findings should serve as a clarion call to regulators – urging them to directly address the perils of horizontal directors while maintaining some of their key benefits.

This chapter investigates how the effectiveness of corporate social responsibility (CSR) can be enhanced through provisions for the responsibility and accountability of individuals, such as directors, who hold key positions or have significant influence on the corporate decision-making process. It draws on the organic theory of the corporation, tone-at-the-top organisational theory, and resource dependency, agency and stewardship theories to demonstrate an anthropocentric approach to corporate governance. This approach identifies critical corporate insiders for CSR-related responsibilisation and accountability.

In this chapter it is argued that a significant part of the reason for private equity’s outperformance is its superior and sophisticated governance structures, as described in this book, with lessons for private equity practitioners, investors and policymakers, as well as academics and others with a general interest in corporate governance and corporate performance.

From his early experiences as a conductor to the final performances of his operas, Richard Strauss collaborated with the most accomplished artists in the German-speaking theater. These associations set standards for productions of his stage works which were essential for their short- and long-term success. Important collaborators included the directors Max Reinhardt and Rudolf Hartmann, choreographers Heinrich Kröller and the duo of Pino and Pia Mlakar, and designers Alfred Roller and Ludwig Sievert. These and other partnerships flourished in the cities which Strauss favored for his premieres: Dresden, Munich, and Vienna. Under the auspices of the Salzburg Festival, Strauss and his stage collaborators established a vital legacy of production that continues into the present.

Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. Chapter 10 provided an overview of the duties as a whole, and Chapter 11 provided the history and current law for those duties which are related to care and skill. Chapter 12 was the first of two chapters addressing the duties of loyalty and good faith and discussed the duty to act bona fide in the interests of the company and for proper purposes, and the duty not to fetter discretions. This chapter deals with the standard of conduct expected from directors by the fiduciary obligation, the duties in the Corporations Act ss 182–183, and the duties on disclosure of material personal interest of directors in ss 191–195 and ch 2E of the Corporations Act.

In this chapter, we explore in detail two key corporate law concepts: the separate legal status of the corporation and limited liability. We discuss limitations and inroads into these concepts, as well as how the corporation—separate from the people who invest in or run it—can be liable in tort and criminal law.