Legal, Ethical and Governance Issues in the James Hardie Asbestos Scandal

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Business Law and Governance
James Hardy

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Table of Contents
Executive Summary....................................................................................................................2
Introduction...............................................................................................................................3
Summary of the Scandal............................................................................................................3
Legal, Ethical and Governance Issues in the Scandal.................................................................5
Legal Issues.............................................................................................................................5
Ethical and Governance Issues...............................................................................................6
Implications of the Scandal on Stakeholders.............................................................................7
Recommendations as a Director................................................................................................8
Conclusion................................................................................................................................10
References................................................................................................................................11

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Executive Summary
The aim of this report is to select the example of a company that was engaged in a
scandal or collusion in order to evaluate the key legal, ethical and governance issues raised
by the company. James Hardie Industries Ltd is selected as the company in this report to
analyse the asbestos scandal of the company and its failure to pay compensation to its
employees. The Australian legal provisions violated by the company and its directors are
analysed in this report along with violation of key ethical and governance principles. This
report also analyse the key stakeholders who were affected by this scandal. Lastly, as a
director, what actions would I had taken to avoid this situation are also provided in this
report.

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Introduction
In today’s competitive business world, companies are expected to effectively comply
with business laws and ethical principles while engaging in their operations to make sure
that they maintain a balance between the interests of their stakeholders. The
responsibilities for directors has increased in companies as the impact of companies
increases on society; therefore, directors have to make sure that they comply with relevant
business laws and ethical principles while discharging their duties to make sure that they
avoid ethical or legal dilemmas (Weiss, 2014). The objective of this report is to select an
organisation that was recently engaged in a scandal or corporate collapse in Australia to
understand the key legal, ethical and governance issues raised in this scandal and their
impact on stakeholders and the role of directors to avoid these scandals. The example of
James Hardie Industries is selected in this report which was recently involved in the
Asbestos scandal. This report will include a summary of the scandal along with the
identification of parties that were responsible for this scandal. This report will also identify
the key legal, ethical and governance issue that arises in the scandal. The implication of the
scandal on organisational stakeholders and the company will also be analysed in this report.
Lastly, this report will outline how as a company director, I had taken actions to avoid this
situation.
Summary of the Scandal
Asbestos is a mineral that is mined and used for commercial purposes for centuries
by companies. In 1982, it was used to build more than 30 per cent of Australian homes, and
it was also used to construct schools and other buildings (Moerman & Van Der Laan, 2015).
However, the key issue with this mineral is that it causes significant health problems such as
mesothelioma and lung cancer. James Hardie Industries Ltd is a major Australian
corporation that also used asbestos in order to manufacture building materials, particularly
fibrocement sheeting (Moerman & Van Der Laan, 2015). During the 1960s, the company
learn about the negative health implications of asbestos on its employees; however, no
actions were taken by the company to increase their safety. In 1978, the corporation started
to put warning stickers on its products in order to inform the handles regarding the fact that
the dust from the product may cause cancer. Employees who worked for the company faced