Regulatory Rooms in Australian Corporate Law

Abstract

It has been said that regulation occurs "in many rooms", and that there is a trend in advanced liberal governments to govern, not directly, but rather through the decisions of autonomous agents. This trend assumes that interconnected and overlapping systems of regulation can be more effective than any single technique.

This article discusses developments in some of the rooms of regulation in contemporary Australian corporate law, providing a snapshot of Australia's overlapping systems of governance. These regulatory developments include the reshaping by the courts of familiar legal duties, such as directors' duty of care and diligence in the landmark AWA litigation and insolvent trading case law, which have increased the risk of liability for directors. The article also discusses legislative backlash to these developments, embodied in a range of reforms, introducing, for example, a US-style business judgment rule into Australian corporate law and giving statutory recognition to directors' rights of delegation.

Other regulatory developments considered in the article include the specter of shareholder liability via shadow directorship; shareholder monitoring and institutional investor activism; the increasingly prominent role played by Stock Exchanges in regulating corporations, and commercial constraints on management in the form of performance-based remuneration and takeovers.

Keywords: Comparative corporate governance, board of directors, regulation, directors' duties, delegation, institutional investors, shareholder activism, executive compensation, performance-based pay, takeovers

JEL Classification: G 30; G 34; J 33; K22, K33; K 40; M 14; M 52