'Doing the Job That's Required'?: Social Licence to Operate and Directors Duties

Abstract

Reactions to Rio Tinto Limited’s blasting activities in Western Australia’s Juukan Gorge in 2020 demonstrated the significance of social licence to operate (‘SLO’) for Australian companies, illustrating the dramatic reputational damage that can flow from lawful but controversial company decisions. Since SLO was first used at a World Bank meeting in 1997, its prominence has grown rapidly. A highly controversial proposal by the Australian Securities Exchange to encourage SLO reporting by listed entities brought the concept into sharp focus for Australian companies. While it has become increasingly clear that stakeholder concerns are part of the matrix of issues directors must, and indeed do, take into account when making decisions, uncertainty has continued to surround the contours of the evolving relationship between directors’ duties and stakeholder interests. This article offers a doctrinal and empirical analysis of the current relationship between directors’ duties in Australia and SLO, elucidating the increasing relevance of SLO for contemporary director practice, but also the complexity of the decisions that directors are called on to make. Judgements on SLO-related issues are among the hardest that directors face, but nonetheless may have become an essential part of ‘doing the job that’s required’ of a director.

Keywords: Social licence to operate; social license to operate; directors duties; corporate law; corporate governance; corporate social responsibility