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Business Associations 1 ~
“Having served on the boards of public companies since 1993, [she] has watched
the culture of boardrooms change from golf games, cigars and fancy dinners to
meetings that begin at 6 a.m. and intense pressure to submerge oneself in ever changing accounting and governance regulations.”1
There is little doubt as to the reason(s) the culture of the boardroom has changed so
drastically over the last twenty-five years. In the post era of Enron and HIH, often dubbed
“the Enron down under”2, and other corporate collapses have led to increased regulatory
oversight, strengthened legislation and demand from shareholders for more accountability.
Governments and corporate bodies have struggled to implement the right level of
accountability as demonstrated in Australia through the HIH Royal Commission.3 This
essay focuses on the company directors accountability to shareholders by looking
specifically at their power through voting and the annual general meeting while reviewing
legislation 4, the Centro5 decision and the shareholder primacy model. Finally, I suggest
these accountability mechanisms, while adequate, leave room for further development.
By the time the Centro case was making its way through the courts, he common fodder on
the evening news of corporate scandals, collapses and board shenanigans left little for
people to be shocked by.
This case focused around a set of financial statements that had incorrectly classified
$1.5billion in debt as non-current, rather than current liabilities while also failing to
disclose $1.75 in guarantees.
The individuals involved relied on management and
professional auditors of the accuracy of these financial statements rather than conducting
turning their own mind to them for review and question. The Court had to decide if the
directors were required to apply their own minds to, and carry out a careful review of, the...
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