The Decision Made by the Board of Directors in the 1960s: A Case Study

In the 1960s, James Hardie's board of directors made a decision to ignore the medical implications of asbestos usage, despite knowing its deadly effects. They prioritized profits over employee health and safety, leading to numerous illnesses and deaths. The company didn't take responsibility for the harm caused until much later, when it was too late. This unethical behavior led to James Hardie's downfall and destroyed its reputation. The case highlights the importance of corporate governance, business ethics, and moral responsibility in decision-making.

JAMES HARDIE
Corporate Governance
[DATE]
[Company name]
[Company address]

ANSWER 1
Stakeholder1 Group of James Hardie Corporate governance responsibilities owed
Supervisory and joint board of directors.
This board consists only non-executive
directors. The directors are appointed by the
shareholders during the meeting of Annual
General. The members of the supervisory
board also have a right to vote for the
selection of another member of the
supervisory board. The corporate governance
2responsibilities of this group of stakeholders
are as follows- (Peacock, 2016)
1. They have to approve the annual budget
and the strategic plan which is being made by
the managing board of directors.
2. They have to approve the annual financial
reports and accounts of James Hardie.
3. They have to overlook the plans and
policies which are being initiated by the
managing board of directors.
4. They have to approve the decisions which
are made in order to issue the shares.
5. They are responsible for selecting and
removing the CEO and other members of
managing a board of directors.
Managing board of directors
This board consists only executive members,
and they are appointed by the shareholders at
Annual General Meeting. The corporate
governance responsibilities of this group of
stakeholders are as follows-
1. They are responsible for allocating the
organization's finances, operations, and
general affairs.
1 Stakeholder: a person who is concerned with the business related activities.
2 Corporate governance: rules and regulations which are to be followed by the company.

2. They have a responsibility to develop a
strategic plan, annual financial budgets,
operational activities and then implementing
those strategies in order to reach the James
Hardie’s goal.
3. They have the responsibility to implement
the strategic plan of James Hardie.
4. They have a responsibility to make annual
and quarterly reports, management reports,
etc.
5. They have to handle the risk which is being
involved in the activities, and they have to
ensure the compliance with legislation.
6. They have to give a report of activities to
the supervisory board of directors and audit
committee of James Hardie.
The former managing board of director and
joint board of director.
The corporate governance responsibilities of
this group of stakeholders are as follows-
1. The general affairs of James Hardie are
being monitored by this group of
stakeholders.
2. They are responsible for giving and
canceling the issue of shares.
3. They are responsible to take the decision
which is important to change to the identity of
James Hardie.
4. They are responsible for preserving
external policies.3
Employees Employees are the main stakeholders of the
company as they are the only one who are
responsible for running the business. They
follow the instructions given by their
management in order to reach the goals. They
report the management about their work and
discuss their issues as well. (Clarke, Dean, &
3 External policies: strategies made by the state in order to protect the state and achieve national goals.

Oliver, 1997)
Customers Customers are also the main stakeholders of
the company as they are the clients4 for whom
the company runs in order to satisfy them.
The customers tell their demands to the
companies in order to satisfy their personal
needs and after fulfilling their needs, they are
supposed to give the feedback so that the
company can improve accordingly.
ANSWER 2
ASX Principle Key corporate governance issue
corresponding to that ASX Principle
The corporate governance council of
Australian Stock Exchanges on March 31,
2007, implemented the principles and best
practice recommendations on corporate
governance. The companies which are listed
in Australian Stock Exchange are supposed to
report the authority that they will follow the
principles and recommendations or not, and if
they do not follow then, they have to give a
reason. And this rule was implemented from
the financial year- January 1, 2007. (Comino,
2016)
The key corporate governance issue of James
Hardie in correspondence to that of Australian
Stock Exchange principle and
recommendation is- (Coutts, 2005)
The financial5 year of James Hardie ended on
March 31, 2007. And James Hardies was
supposed to report according to the principles
and best practice recommendations on
corporate governance of Australian Stock
Exchanges. In that report, James Hardie also
commented that to what extent they followed
the principles and best practice
recommendations of Australian Stock
Exchange for the financial year March 31,
2007. And it also showed all steps and
procedures which were being followed in
order to complete the best practice
recommendations and principles with respect
to Australian Stock Exchange. James Hardie
adhered most of the Australian Stock
Exchange principles and recommendations.
The corporate governance issues were-
1. James Hardie didn’t disclose the existent
4 Clients: a person who is getting and using the desired services of a company.
5 Financial year: it is a time period which company uses for financial statements.

practices earlier.
2. The employees complained that they were
having health issues, but it was not clear that
the issues were caused by the usage of
asbestos or not and the James Hardie didn't
pay any attention towards it.
3. In 1938, Ministry of health report came
which stated that asbestos is the only reason
behind the health issues of the employees and
the nearby mining companies but still James
Hardie didn’t take any action.
4. Employees claimed the compensation,
James Hardie started investing in medical
research compensation6 foundation but didn’t
provide enough funds to the foundation and
didn’t take any further action.
5. James Hardie cleared the claim of
employees after 40 years and still didn’t clear
the claim of the management.
Because of this issues, only James Hardie
didn't follow the Australian Stock Exchange
best practices recommendations and
principles. The company also stated that they
are making the section of corporate
governance on their website soon and would
show corporate governance practices and
policies of James Hardie.
James Hardie operated under the various
jurisdictions7 like US Securities and
Exchange Commission (SEC), Securities and
Investment Commission (ASIC), etc.
6 Compensation: money which is given during the time of injury or loss.
7 Jurisdictions: it is a system of law which ensures the legal decisions.

ANSWER 3
ASX Principle Actions company should have taken to
comply with the ASX guideline
The corporate governance council of
Australian Stock Exchanges on March 31,
2007, implemented the principles and best
practice recommendations on corporate
governance. The companies which are listed
in Australian Stock Exchange are supposed to
report the authority that they will follow the
principles and recommendations or not, and if
they do not follow then, they have to give a
reason. And this rule was implemented from
the financial year- January 1, 2007.
The actions which James Hardie would have
taken in order to comply with the ASX
guideline are as follows-
1. When the employees complained that they
were having health issues while working then
at that time only the director of James Hardie
should have taken an action in order to find
the reason behind the health issues of the
employees.
2. In 1938, when the report of ministry health
came and stated that the asbestos is the main
reason behind the illness of employees, and
the nearby mining companies, director of
James Hardie should have taken a step in
order to protect the main stakeholders of the
company and the environment.
3. When the James Hardie invested in medical
research compensation foundation but
stopped the progress then at that it should
have provided enough funds to the investment
for the welfare of the employees.
4. James Hardie didn’t clear the claim of the
management when the claim was re-estimated
8after 40 years in order to pay the employees
and this led to liability on the company to a
great extent. In order to solve this problem,
James Hardie should have taken the action
before 40 years, and this would have helped
the company to survive for a long run.
Therefore, James Hardie should have taken
the immediate actions when the problem
occurred, and this would lead the company to
survive with less or no liabilities. (Holand,
8 Re-estimated: it is an approximate opinion which is done in a case of money.

2016)
ANSWER 4
Stakeholder Group of James Hardie How long term interests of stakeholder groups
were affected or exacerbated
1. Supervisory and joint board of directors.
2. Managing board of directors.
3. The former managing board of director and
joint board of director.
4. Customers
5. Employees
6. Government9
The long-term interests of stakeholder groups
were affected very badly and to a great extent
by the decision of James Hardie’s director in
order to continue the manufacturing of the
asbestos based products. These stakeholder
groups knew that the decisions they were
taking would badly impact the environment
They knew very well that the usage of
asbestos would be very harmful as it resulted
in lung cancer and other major diseases.
Earlier they didn’t recognize the symptoms of
the diseases but after 15 years in the mid-
1960s, they understood the reason behind the
diseases. Asbestos was used in industrial and
domestic buildings, linings, sheeting of fibro,
etc. and the asbestos was not only affecting
employees, but the people around it were also
getting effected, for example, demolition
contractors10. It was very difficult for
stakeholders to make the decisions and to
complete their responsibilities as they knew
they were taking decisions by risking their
lives. And in the late 1960s even employees
claimed their compensation because they
were working by risking their lives.
Employees were losing their lives and the
customers were losing their interest in the
company, and the government was not taking
any legal action, and James Hardie was not
9: look after the needs of a particular nation for the welfare of the society.
10 Demolition contractor: who destroy the buildings.

doing anything for the corporate governance.
(Hills, 2005)
Therefore, the long-term interests of
stakeholder groups were affected to a great
extent, and they were forced to take decisions
about the usage of asbestos by risking the
lives and the nearby mining companies. They
were only focusing on generating the profits
and were not concerned about the health
issues. The director of James Hardie also
became ill because of the usage of asbestos
but still he didn't stop the usage of asbestos in
spite, of his ill health. And it took another 20
years to stop the usage of asbestos.
And when finally James Hardie decided to
take an action to overcome this problem then
it was surrounded by the case imposed by the
ASIC with some allegations.
ANSWER 5
The decision made by the board of directors in 1960s is to sit quietly and ignore what was
happening in the surrounding. As they ignored the medical implication which exposed the
truth of asbestos and it further led to a problem when employees claimed the compensation
and the directors didn’t take any action in order to solve the problem and this increased the
liability11 and it became difficult for James Hardie to survive.
The decision was legal to some extent as there were no strict government rules and regulations
for the corporate governance and because of this reason the only company didn't take any
action. And if there was a strict law for the corporate governance in mid-1960s, we would
have said that the decision was illegal, and the company would have taken an action for the
betterment. There were no Business ethics in James Hardie as the directors were not paying
any attention towards the controversial12 issues of the company and they were taking it very
lightly. And James Hardie was not taking the corporate social responsibility to a great extent.
James Hardie didn't have any moral ethics as they were not paying any attention towards what
11 Liability: it is a state of disadvantage for a person
12 Controversial: disagreements in the opinions

was right or what was wrong and they were just ignoring the situations and problems, and it
resulted in a closure of the company. (Watson, 2007)
The decision of the directors of James Hardie was not ethical13 at all in mid-1960s. As the
company was not concerned about the health and safety of employees, the human rights, etc.
the company just ignored everything and keep producing till 1987. James Hardie didn’t have
any business ethics as they were working unethically and were not doing anything for
corporate governance and the company didn’t take any measures for the safety of the
employees and the nearby mining companies. And people were getting major health diseases.
James Hardie also didn’t have any moral ethics as the directors were completely ignoring what
was right and wrong for the stakeholders and they were just busy in producing in order to
generate profits. For example, when the employees complained that they are becoming ill
because of asbestos and the management just ignored them, and this resulted to unethical
behavior. (Govrik, 2016)
ANSWER 6
Specific Stakeholder Group
How did actions threaten James Hardie’s
corporate sustainability
1. Supervisory and joint board of directors.
2. Managing board of directors.
3. Former managing board of director and
joint board of director.
4. Customers
There are some actions of stakeholders which
threatened James Hardie corporate
sustainability are as follows:
1. The directors of James Hardie didn’t take
any action when the employee complained
about the health issues and this stopped the
company to achieve corporate sustainability.
2. James Hardie decided to clear the
compensation claim of employees after 40
years but didn’t clear the claim of the
management and this didn’t allow the
company to achieve corporate sustainability.
3. James Hardie started the foundation of
medical research compensation for the
13 Ethical: it is related to principles and values related to business activities.

5. Employees
6. Government
welfare of employees but didn’t raised the
enough funds for the foundation and this
became a major reason for James Hardie to
not to achieve corporate sustainability.
4. In the mid -1960s, there was no such law
for the corporate governance and because of
this the interference of government was very
less. And this didn’t allow the company to
achieve corporate sustainability14.
Therefore, in order to achieve corporate
sustainability the company should have taken
immediate actions and should have focused
more on corporate governance and the
company should have focused more on
business and moral ethics in order to retain
the employees and they would not have
claimed the compensation.
But, James Hardie was not able to survive for
a longer period of time and took away the
lives of many employees and destroyed the
environment and the nearby mining industries
as well.
REFERENCES
14 Corporate sustainability: helps in creating customer and employee value for a longer period of time with the help
of natural environment.

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