Company Law Reform
The greatest need for improved corporate practice is with companies that have the greatest impact on our society – public companies.
The fundamental issue is that public companies should be fully accountable not only to their largest shareholders but to their individual shareholders. They must also be accountable for their actions if they affect society and the environment. The way in which this corporate accountability is advanced and enforced is the responsibility of every democratic government.
Australian Democrat achievements
The Australian Democrats have led the way on many aspects of corporate law reform. We sought changes to the Company Law Review Bill in 1998, the Corporate Law Economic Reform Bill in 1999 and the Financial Services Reform Bill in 2001. Just a sample of the changes that we achieved are:
whether they take into account ethical, social or environmental matters when using investors funds.
Corporate Governance
The issue of corporate governance is at the heart of managerial and board accountability. Existing company law is inadequate in terms of corporate governance.
Directors' duties are very wide on operational and management matters, and can create situations where major conflicts of interest, mismanagement and even corruption can go unchecked. As some of the recent corporate collapses show, at worst, directors and senior management can evade their full responsibilities to the company's shareholders. Auditors' independence can be compromised by poor governance practices.
Corporate Democratisation
There is currently a great disparity between the principles of corporate democracy and the rules set out in the Corporations Act governing the internal operations of companies. For example, the existing method of electing company directors on a limited re-election basis allows dominance by control groups and inhibits the likelihood of support being expressed for particular directors or independent directors.
The law does not enable minority interests to be heard through more accessible internal procedures, forcing them to rely on expensive and time-consuming formal procedures like the legal system and the ASIC. Unacceptable discriminatory practices still apply, and women are still in a small minority as directors.
Related Companies
Corporate restructuring is used by unscrupulous companies to deprive creditors (including employees) of access to assets, when a subsidiary collapses. There have been recent examples of this where employees, and creditors generally, have lost out where the company responsible for the failure has been a holding company that has washed its hands of the debts of the subsidiary company.
When companies were originally conceived, it was intended that they would provide a benefit of limited liability to their owners – the shareholders. It was not intended that they would be manipulated to allow the separation of assets in one company and liabilities in another, resulting in those to whom money is owed having access to no significant assets to satisfy their entitlements.
In accordance with recommendations of the Law Reform Commission in 1988, the Democrats propose making related companies liable for the debts of insolvent companies in limited circumstances. It would be up to a court to consider matters like:
The Democrats also believe that the law should require that bonuses paid to directors or management in the twelve months prior to a corporate collapse should be returned. #
TAXATION, FINANCE & CORPORATE AFFAIRS