Directors' Duties in Australia: Should They Include Employees, Environment and Community?

Running head: BUSINESS LAW
Business law
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Author Note

1BUSINESS LAW
1.0 Introduction
Corporation law has been enacted to govern the provisions related to operations of company.
In Australia, corporation law is governed through the rules of the Corporation Act 2001 (Cth)1.
Under this law there are special rights and liabilities which are imposed on officers and directors
of the company. They have been given the power to make all decisions which are necessary for
regulating the affairs of the organization. Under the light of these powers there are certain
general duties which the directors have to obey while serving the company. These duties are
specifically owed by them to the company according to the words of legislation2. However, the
company is also a separate legal entity and as it operates in the society its stakeholders include
employees, environment and the community. The debate in this situation is that whether the
duties of directors provided for in the CA should be extended to include employees, environment
and the community. The thesis statement of this paper is that duties of directors provided for in
the CA should NOT be extended to include employees, environment and the community.
2.0 Directors and the company
The directors are the agents of the company and as agents they are considered to be in a
fiduciary obligation with the organization. They have all powers which are needed to manage the
affairs of the company and as provided in the case of Howard Smith Ltd v Ampol Petroleum Ltd3
and Imperial Hydropathic Hotel Co, Blackpool v Hampson4 that they can even make a decision
which has not been authorised by the shareholders. Thus, they have to ensure that as fiduciaries
to the company they do not indulge in any action which can cause detriment to the company.
1 Corporation Act 2001 (Cth)
2 ANDREW. KEAY, L. L. B. DIRECTORS'DUTIES. JORDAN PUBLISHING Limited, 2016.
3 [1974] AC 821
4 (1883) 23 Ch D 1

2BUSINESS LAW
Thus, there only obligation is to ensure that they work in a way which is beneficial for the
company. Taking into consideration to interest of other stakeholders may create a position of
conflict of interest for the directors.
3.0 Directors’ duties under corporation law
Under the CA there are primarily four duties which the directors needs to consider while
discharging their functions which are known as the general duty of directors. These
responsibilities are elaborated in the legislation via s 180 to s 183. The duties mandate the
directors to discharge responsibilities with diligence and care, act in best interest of the company
in a proper purpose in good faith, not to improperly use position held in company and not to
improperly use company information to its detriment. There is no mention in the legislation that
the directors should take into consideration the interest of the any other stakeholders rather than
shareholders of the company5.
4.1 Arguments for inclusion of duties to Employee, environment and community
The primary argument which can be provided in support of the inclusion of employees,
environment and the community into the directors duties is according to the broad view of CSR.
The broad view of Corporate Social Responsibility states that as the company has been provided
with a separate existence in the society it is the responsibility of the organization to take care of
those who are affected by its operations. The primary groups which may be affected by the
operations of an organization includes the employees who work for it, the environment which is
deteriorated due to the operations of the organization and the community which is related to its
5 Tran, Ben. "Corporate social responsibility." (2018) Encyclopedia of Information Science and Technology, Fourth
Edition. IGI Global,. 671-681.