Corporate Governance

Running head: CORPORATE GOVERNANCE
Corporate Governance
Name of the Student
Name of the University
Author’s Note

1CORPORATE GOVERNANCE
Table of Contents
Introduction......................................................................................................................................2
Present Framework Related to the Directors’ Duties......................................................................2
The Impact of Over-Regulation on the Interests of the Companies................................................5
Self-Regulations and Law Imposed.................................................................................................6
Conclusion and Recommendations..................................................................................................8
References........................................................................................................................................9

2CORPORATE GOVERNANCE
Introduction
The principles of Corporations Act put the obligation on the company directors to release
their duties, responsibilities and powers with the aim to act for the business interest of the
companies. The underlying fact is that the directors need to discharge their duties and powers for
maximizing the organizational wealth for the best interest of their shareholders (Tricker and
Tricker 2015). However, the occurrence of some recent disputes has raised the concern related to
clarify the existing laws of Corporations Act that will include the consideration of the interests of
all stakeholders beyond the shareholders. On a more specific note, the clarification will include
whether the directors ought to take into account other stakeholders’ interests like employees,
customers, suppliers, people of community, environmental groups and others (Claessens and
Yurtoglu 2013). This report considers the inspection of the directors’ responsibility for
considering the interests of all stakeholders. This report is made with the intention to present it to
the Australian Institute of Company Directors (AICD).
Present Framework Related to the Directors’ Duties
A recent call has been made related to the Corporations Act improvement in the areas of
the directors’ duties and the sole focus of the directors on the interest of the company
shareholders is the main reason for this reformation (sloanreview.mit.edu 2018). The case of
James Hardie’s controversial decision can be presented as example in this context. As a result of
the fall in the share prices, there was both the reputational and financial loss of the company; and
the directors of the company ignored the asbestos victim’s interest in the process to safeguard the
interest of the company (Moerman and van der Laan 2015). In the later situation, the company
was able in increasing their share price along with the financial stability by taking the decision to

3CORPORATE GOVERNANCE
consider the stakeholders’ interest that are the asbestos victims with the assistance of NSW
Government and ACTU. This process also led to service the shareholders of the firm due to the
boost in financial stability. Thus, the above-discussed situation of James Hardie as well as the
recent corporate governance improvements indicates towards the fact that the companies are
discouraged from not to consider the interest of all stakeholders. The companies can uphold their
financial performance by fostering relationship with all the stakeholders (Moerman and van der
Laan 2015).
There is presence of many laws and regulations to take into account the stakeholders’
interest in the process to make business decisions. This aspect leads to the compliance of the
Australian Securities Exchange (ASX) companies with the ASX Corporate Governance
Council’s ‘Principles of Good Corporate Governance and Best Practice Recommendations’ and
it puts the obligation on the Australian to show their extent of compliance with the above
principle in the published annual report (Tricker and Tricker 2015). Apart from thus, according
to this principle, the Australian firms ought to disclose their schemes for handling the interest of
the stakeholders under the section named ‘Code of Conduct and Ethics’ in their official company
website (Tricker and Tricker 2015).
These Codes of Conducts assist the companies to form important policies as well as
values for assisting the company directors to take into account all stakeholders’ interest in the
processes of business decision-making and risk management. Under the ASX ‘Good Corporate
Governance Principles’ the firms can access 28 recommendations where the 10th
recommendation or principle is mostly relevant to the company stakeholders (Beekes, Brown
and Zhang 2015). This particular principle puts the obligation on the company directors to
recognize the interest of each stakeholders group for the establishment of successful corporate