Theme Park Safety Crisis Analysis

This assignment delves into a tragic theme park accident, focusing on the company's inadequate safety measures and breach of corporate governance principles. It requires a critical analysis of the incident, exploring the role of risk management, communication with stakeholders, and adherence to ethical standards.

Running head: CORPORATE LAW
Corporate Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Question A.......................................................................................................................................2
Question B.......................................................................................................................................4
Question C.......................................................................................................................................6
Question D.......................................................................................................................................8
Reference List................................................................................................................................10

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Question A
According to the Principle 7 of the Australian Security and Investment Commission,
the board of directors of a company with respect to the public company is under statutory duty to
detect risks and implement effective measures in order to address such risks. In the event, the
Board of directors of a public listed company fails to recognize the risks arising in the company
and is unable to resolve the same; it would affect the shareholders of the company. The
shareholders, employees, consumers of the company would suffer loss and such failure shall
have an adverse impact on the society as well1.
The ASX has specified certain recommendations with respect to risk management, which
requires every board of directors of a public company to establish at least one committee with a
view to identify and alleviate the risks. The committee shall review the risk management
framework of the company every year to ensure the efficacy in the implementation of the
framework2. The member of the committee shall include minimum three directors who shall be
conferred with then power to work independently without any interference. The ASX have made
recommendations taking into consideration of the accountability of the review process.
The recommendations require the directors of the company or the committee members to
make necessary disclosure of the role and structure of the internal audit functions of the
company. Any material exposure with respect to environmental, economic and social risks
1 Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and practices. Oxford
University Press, USA, 2015.
2 Guiso, Luigi, Paola Sapienza, and Luigi Zingales. "The value of corporate culture." Journal of Financial
Economics 117.1 (2015): 60-76.

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associated with the public company must be disclosed along with the disclosure of the structure
that is adopted by the company for managing the risks associated with the company.
In the given scenario, the Board of Ardent leisure has been alleged for causing fatal
accident and failed to take any immediate initiative after the fatal accident. The company have
been subject to several criticisms for failing to carry out safety management of the company. The
companies have failed to recognize and mitigate the risks that were associated with the incident.
It is a well-known fact that the occupier of the premises is held responsible for any harm
that is caused to any person within the premises. Hence, it can be said that in the Ardent
Leisure’s case, the company is held liable for the accident that claimed the lives of several
patrons. If the company had adopted an effective risk management framework, it would have
enabled the company to recognize the risks that was associated with the particular ride and could
have mitigated the same, ensuring safety of the patrons riding them.
In regards to the post accident circumstances, the company had failed to take reasonable
steps to deal with the subsequent crisis due to lack of risk management tactics. If the company
had adopted appropriate risk identification system, it could have implemented effective measures
in dealing with the crisis post the Dreamworld incident. It lacked professionalism while dealing
with the subsequent crisis, which caused hardship for the families of the deceased patrons3. The
absence of an effective risk management framework in the company has not only caused
financial loss to the country but also led to a loss of goodwill of the company. Therefore, from
the above facts it is evident that the Board of Directors failed to identify the risks associated with
the rides and caused such a fatal accident.
3 Epstein, Marc J., and Adriana Rejc Buhovac. Making sustainability work: Best practices in managing and
measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers, 2014.

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Question B
As discussed earlier, principle 7 of good corporate governance states that the Board of
Directors of every public company is under statutory obligation to recognize and mitigate the
risks associated with the business activities of the company by implementing appropriate risk
management framework. The organizations are required to set up committee that would be
focusing on adoption and implementation of effective risk management framework within the
organization4. The Committee members are responsible to identify the issues and address them,
thus, ensuring establishment of effective risk management with within the organization. The
Committee members are empowered to recognize and mitigate any issues that arise from the
situation.
In the given scenario, the Ardent Company should have established a crisis management
team for addressing issues associated with Dreamworld. With the absence of such crisis
management team, the company could have implemented rapid and effective action to deal with
the post accident crisis. The crisis management team in an organization would have ensured
effective measures and minimized the risk. Principle 7 of the corporate governance requires the
organization to manage social, economic and environmental risks associated with the business
activities carried out by the business organization. If such risk management was adopted by the
organization, it would have enhanced the accountability of the organization towards the risk
addressing management and the company could have prevented the occurrence of the incident.
Hence, it can be said that the company has failed to comply with the principle 7 of good
corporate governance stipulated by ASX, which required them to recognize the risks and
mitigate them.
4 Salvioni, Daniela M., and Riccardo Astori. "Sustainable development and global responsibility in corporate
governance." (2015).

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Due to the lack of effective risk management framework, the company had to face legal
consequences and had to go through high-level competitive disadvantage due to poor governance
strategies and infringement of the provisions stipulated under principal 7 of ASX in relation to
good corporate governance5. The failure of the company to address the risks associated with the
company or the business conducts of the company may lead to unnecessary incidents that are
contrary to the welfare and best interest of the company. The incompetency of the company to
recognize the risks makes the company prone to unnecessary risks and in addition, the company
had to suffer heavy losses. The goodwill of the company also decreases because of failing to
identify the risks and manage it effectively. The investors may feel reluctant to invest in the
company any further. Furthermore, lack of accountability among the officers and the employees
in the absence of risk management system shall result in bad quality services and decline in the
productivity.
The Australian Securities Exchange have a policy ‘if not why not’ policy’ according to
which if an organization fail to adopt the recommendations provided by the ASX, they would
have to provide an explanation why they have not adopted such recommendations. The Chief
compliance officer of ASX may provide enforcement decisions against the company for not
acting in compliance with the rules of the ASX6. The aggrieved party is entitled to prefer an
appeal before the ASX Appeal Tribunal. A penalty of $250000 for infringement of operating
rules and a penalty of $ 100000 may be imposed for violating the Austra Care regulations in the
firm of compensation to persons affected by the breach caused by the organization. Hence, in the
5 Hopkin, Paul. Fundamentals of risk management: understanding, evaluating and implementing effective risk
management. Kogan Page Publishers, 2017.
6 Pearson, Gail. "Failure in corporate governance: financial planning and greed." Handbook on Corporate
Governance in Financial Institutions (2016): 185.

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given scenario, the ASX may impose civil penalties with respect to the incident and the directors
shall be disqualified and become subject to pecuniary penalties.
Question C
According to section 180 of the Corporation Act 2001, the directors of an organization
are under statutory obligation to exercise duty of care and diligence while discharging the
directorial obligations towards the stakeholders and the organization as well. The extent of care
and diligence that is expected from the directors to exhibit must be similar to the level of care
and diligence that would be exhibited by any prudent person holding the position of the director
and under the similar circumstances.
In the event of breach of section 180 of the Act, the court shall impose civil penalties
upon the breaching party under section 1317 of the Act. The section confers the directors with
the power to discharge certain duties that are based on the equity and common law. As per the
Business Judgment Rule, a decision taken by the directors of an organization shall be
considered legal of the decision is taken in good faith and for a legitimate purpose7. While
making the decision, the directors must ensure that the interest is in the best interest of the
company and if any prudent person had been in the position of the director, he/she would have
considered such decision as reasonable and is in the best interest of the company8.
In the Australian Securities and Investment Commission (ASIC) v Cassimatis [2015]9,
the directors of the company had committed breach of the section 180 of the Act and the
7 Beekes, Wendy, Philip Brown, and Qiyu Zhang. "Corporate governance and the informativeness of disclosures in
Australia: a re‐examination." Accounting & Finance 55.4 (2015): 931-963.
8 Guo, Feng, et al. "Effects of project governance structures on the management of risks in major infrastructure
projects: A comparative analysis." International Journal of Project Management 32.5 (2014): 815-826.
9 [2015] NSWSC 1744

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decisions taken by the company were inconsistent with the provisions of the statute and any
prudent person would not have infringed such provision. In ASIC v Matiner Corp [2015]10, the
Court held that although the directors are not imposed with several obligation but the primary
statutory obligation that the directors must exercise is to act in consistent with the legislations
stipulated under the Common Law.
In the given scenario, it is already established that the Ardent Leisure company had
committed a breach of the principles relating to risk management provided by ASX. As observed
in the Matiner’s case, that in order to establish a breach under section 180 of the Corporations
act 2001 (Cth), the aggrieved party must prove that the director of the company had infringed
any existing legislation or the principles of Common Law which otherwise would not have been
violated by any prudent person11.
Furthermore, it is evident from the above facts that under the similar circumstances where
the directors of the Ardent leisure were in the present case, any prudent person would not have
breached section 180 of the Act. The directors of the company shall be imposed with the
additional penalties under section 1317 apart from the financial loss that the company had
already sustained.
Question D
The CEO of Ardent Leisure Pty ltd, Deborah Thomas, had resigned from her post after
the accident that occurred in the amusement park. She had faced several criticisms for failing to
deal with the post accident circumstances effectively. As per reports, the primary objective of the
10 [2015] 327 ALR 95 at [144]
11 Price, John. "ASIC report: The director's role in corporate governance." Company Director 30.1 (2014): 12.

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company was to concentrate on the entertainment market in the United States and the company
became one of the leading companies in global entertainment within a short span of time. There
was a significant decline in the shares of the company by 7.8% approximately post the
Dreamworld incident. Since the commencement of the investigation, post the Dreamworld
incident, the company had been engaged in undertaking damage control procedures.
The company asserted that it is analyzing the situation and the cause of facts that led to
the occurrence of the accident in assistance with the emergency authorities and the police
authorities. Since the incident resulted in an overall loss 49.4 million the company had
undergone an adverse financial crisis. The amusement park did not open for 45 days and the
company involved in initiating commissions for conducting the safety review and for the
structure of the amusement park12.
The company admitted that they failed to exhibit due care and diligence and failed to take
reasonable steps while dealing with the circumstances post the incident and failed to act
diligently in the first 48 hours subsequent to the incident. They further admitted that it was
possible for them to deal with the situation in a better and much more organized way. The crisis
management expert from Deloitte, Graeme Newton, was hired by the company along with the
former policeman named Mike McKay from Queensland. The company initiates safety review
process according to which all rides must be subject to verification before the rides are operated
in the park.
In addition, the ride which led to the accident, Thunder River Rapid, has been closed
permanently by the company. Whenever, there is a situation that involves loss of life, the
12 Williams, Belinda Rachael, Simone Bingham, and Sonia Shimeld. "Corporate governance, the GFC and
independent directors." Managerial Auditing Journal 30.4/5 (2015): 324-346.

9CORPORATE LAW
company should follow the principles stipulated under the Ten Commandments13. According to
the principles, it states that under such circumstances, the company must contact the family
members of the person who have lost their lives or are injured in any accidents. However, the
company completely, ignored such principles. It was only after the incident that the company
made initiatives regarding collaboration policies with the private sectors and felt the necessity to
establish an effective risk management framework. The company persists to act in defensive
mode ad is providing justifications for its conduct and emphasizes that the so called robust
policies and procedures have made the company one of then leading companies in the field of
Global entertainment since 1981.
13 Smith, Helen. "Australia's Company Law Watchdog: ASIC and Corporate Regulation." (2015): 145.

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Reference List
ASIC v Matiner Corp [2015] 327 ALR 95 at [144]
Australian Securities and Investment Commission (ASIC) v Cassimatis [2015] NSWSC 1744
Beekes, Wendy, Philip Brown, and Qiyu Zhang. "Corporate governance and the informativeness
of disclosures in Australia: a re‐examination." Accounting & Finance 55.4 (2015): 931-963.
Epstein, Marc J., and Adriana Rejc Buhovac. Making sustainability work: Best practices in
managing and measuring corporate social, environmental, and economic impacts. Berrett-
Koehler Publishers, 2014.
Guiso, Luigi, Paola Sapienza, and Luigi Zingales. "The value of corporate culture." Journal of
Financial Economics 117.1 (2015): 60-76.
Guo, Feng, et al. "Effects of project governance structures on the management of risks in major
infrastructure projects: A comparative analysis." International Journal of Project
Management 32.5 (2014): 815-826.
Hopkin, Paul. Fundamentals of risk management: understanding, evaluating and implementing
effective risk management. Kogan Page Publishers, 2017.
Pearson, Gail. "Failure in corporate governance: financial planning and greed." Handbook on
Corporate Governance in Financial Institutions (2016): 185.
Price, John. "ASIC report: The director's role in corporate governance." Company Director 30.1
(2014): 12.

11CORPORATE LAW
Salvioni, Daniela M., and Riccardo Astori. "Sustainable development and global responsibility in
corporate governance." (2015).
Smith, Helen. "Australia's Company Law Watchdog: ASIC and Corporate Regulation." (2015):
145.
Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA, 2015.
Vakkur, Nicholas V., and Zulma J. Herrera. Corporate governance regulation: how poor
management is destroying the global economy. John Wiley & Sons, 2013.
Williams, Belinda Rachael, Simone Bingham, and Sonia Shimeld. "Corporate governance, the
GFC and independent directors." Managerial Auditing Journal 30.4/5 (2015): 324-346.