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No lesson from UK on CSR

AUSTRALIAN LAWYERS are not in favour of changing directors’ duties as a way of ensuring Corporate Social Responsibility (CSR), a conference determined last week.Reforms to directors’ duties…

user iconLawyers Weekly 04 September 2006 SME Law
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AUSTRALIAN LAWYERS are not in favour of changing directors’ duties as a way of ensuring Corporate Social Responsibility (CSR), a conference determined last week.

Reforms to directors’ duties currently being debated in the United Kingdom would not improve the Corporations Act 2001, according to a majority of lawyers in the audience.

“My take at the end of the conference is that most of the lawyers present seemed to me to be very sceptical as to whether an amendment of the kind that is being introduced in the United Kingdom [would be suitable for Australian law],” said Alan Cameron AM of Blake Dawson Waldron, who participated in the conference.

Held in Banco Court, the conference was jointly hosted by the Supreme Court of New South Wales and the Law Society of New South Wales, with the theme “Should Australia follow the UK approach to directors’ social responsibility?”.

The UK debate was summarised by key note speaker the Right Hon Lady Justice M H Arden, DBE, who is a member of the Court of Appeal of England and Wales, a distinguished company lawyer, and the former chair of the Law Commission of England and Wales. In Australia at the invitation of Allens Arthur Robinson, Arden has made an integral contribution to the debate over the reform of the UK directors’ duty of good faith under clause 158 (now clause 173).

June McPhie, president of the Law Society of NSW described the proposed changes as “the most significant reform in the UK company law for several decades”. But Cameron said the reforms would not be advantageous for Australian company law.

“Clause 173 did not impress the room for several reasons. First, I think there is a degree of scepticism as to whether any change is necessary in Australia at all, or indeed in the United Kingdom, but secondly … [because] corporations are capable of behaving responsibly and behaving as good citizens, without the necessity to make the changes that are being contemplated in the UK,” he said.

The Hon Chris Pearce, Parliamentary Secretary to the Treasurer, spoke of the government’s support of the need for corporations to embrace CSR as a means of achieving sustainable business practices. He cited, by way of example, government initiatives such as the Prime Minister’s Community Business Partnership and work being done by the Corporations and Markets Advisory Committee (CAMAC) and the Parliamentary Joint Committee (PJC) on Corporations and Financial Services.

The PJC final report on its inquiry into CSR, released in June, did not recommend changes to the directors’ duties provisions of the Corporations Act. CAMAC is due to release its views on the issue later in the year.

Pearce said “the government will examine the [PJC’s] findings, along with the advice from CAMAC, before taking a decision on whether we need to further clarify the current regulatory framework”.

But according to Pearce, the government had already provided significant support to business, which enables corporations to behave responsibly, especially where stakeholders are involved.

“Company directors need to take into account the interests of stakeholders when making decisions in the interests of companies. Our current regulatory framework supports this goal,” he said.

McPhie said the need for a proper consideration of CSR, whether as a mandatory legal obligation or a voluntary measure, is one which cannot be ignored.

“Corporate Social Responsibility has become a timely issue of critical importance enhanced by the events associated with the James Hardie Group and the Parliamentary Joint Committee on Corporations and Financial Services Inquiry,” she said.

Although Pearce agreed on grounds of business sustainability, he warned that it “is paramount to ensure that if changes were implemented in regard to director duties, that they would actually deliver improved outcomes for all stakeholders and not in fact impede potential growth and stifle opportunities”.

According to Pearce, there was already an indication that businesses were doing a good job in regulating their own behaviour.

“Over the last ten years or so, there has been a marked change in attitude. Corporations now embrace the idea of contributing socially and environmentally, as well as economically, to our country,” he said.

The conference marked the first occasion that the Law Society and the Supreme Court have jointly hosted an event. McPhie said that the conference was a positive experience, and one that the Law Society hopes to repeat in the future.

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