Corporate Governance and Business Law Analysis of Ardent Leisure

This report provides a detailed analysis of the Ardent Leisure case, focusing on its failures in corporate governance and adherence to business laws, particularly in the context of the Dreamworld incident. The report examines the company's non-compliance with ASX regulations, specifically Principle 7 of Corporate Governance, and its inadequate risk management framework. It highlights the directorial board's failure to recognize and mitigate risks, leading to severe consequences, including the loss of life and significant financial and reputational damage. The analysis covers the legal obligations of companies, the role of the ASX, the importance of corporate governance, and the responsibilities of directors under the Corporations Act 2001 (Cth). The report also discusses the company's response to the incident, including its initial lack of action, subsequent measures, and the long-term impact on its business. The analysis emphasizes the need for proactive risk management, effective corporate governance, and the importance of fulfilling legal obligations to protect stakeholders and maintain a company's standing.

Running head: BUSINESS LAWS
Business Laws
Name of the student
Name of the university
Author note

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Question A.
It is required by a company listed in the ASX to establish a suitable framework that
solely concentrates over the degrees of management of risk in the bounds within the entity, such
laws are clearly stated in the ‘Principle 7 of the Corporate Governance.’ It is required by the
laws of the ASX that the said entity’s directorial board has to, by all the power bestowed upon it,
act to the culmination of various processes and steps that would be taken into action when and
only when a risk factor is discovered, in order to solve possible issues1. The failure to provide
accurate judgment and recognition to the factors of risk may not only lead to the downfall in the
goodwill of a company in the society, but will in all cases lead to the withdrawal of investors and
potential investments, workers, consumers and every other factor.
When the above discussion is taken in relation with the company in the question, that
is Ardent Leisure, it is seen that in the Dreamworld incident, the entity had not only refrained to
take proper actions immediately, but it is clearly seen that the directorial board had made no
necessary measures in the incorporation of a suitable risk management framework. It can be
rightfully said that the company in question made no attempt in recognition of risk and tried to
resolve it in any way.
It is bound by the stringent laws of the ASX that every company has to create a
separate committee that would only concentrate its said powers that are bestowed upon it by the
directorial committee in incorporation of the will of the Principle 7 and ASX and examining risk
factors and creation of precautionary measures. It is willed by the law that such a committee will
1 Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles and
recommendations . ASX Corporate Governance Council." (2014).

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have three separate directors controlling it. The review and incorporation of such laws are strictly
obeyed by the directors.
In context to what was discussed in the previous paragraph, it can be clearly said that
the company, Ardent Leisure, had had no proper framework for the said management of risk and
hence, was unable to take even the slightest action when and after the accident occurred. Not
only did the said entity fail to recognizing the factors of risk, but couldn’t take a proper step in
order to mitigate the damage. Its actions can be clearly blamed upon the directorial board of the
company and deserved the backlash that it so strongly received.
It is necessary by law for company to maintain a good corporate governance, unlike
the company in question, Ardent Leisure. Stringent laws are to be incorporated such that the
various functions and relationships with its bounds can be taken care of. It helps in keeping
accountability of the workers and the ones controlling the processes in the said corporation2.
Investors are attracted to a company with a strong Corporate Governance scheme.
As judged by what was stated in the previous discussions, it can be said that the
company, lacking a proper risk management framework, caused the accident and failed to
incorporate any measures in order to mitigate it. It is a law of ASX that the owner/occupier of a
property is responsible for any kind of damage done to any human life, whether injury or death
that is caused inside his premises and has to take measures in order to mitigate them. But, In the
case of Ardent Leisure, the company failed to introduce any such measures as there was no
framework to support it3. Hence, the avoidable accident turned to a disaster.
Question B.
2 Booth, Simon A. Crisis management strategy: Competition and change in modern enterprises. Routledge, 2015.
3 Council, ASX Corporate Governance. "Corporate Governance Principles and Recommendations, 3rd edn (ASX,
Sydney)." (2014).

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Previously, it was seen that by the rules incorporated by the ASX, all the companies
are bound to create a separate committee that functions with sole purpose of find risk factors and
incorporation of the necessary steps that would lead to the desired solution required by the
company in order to deal with the risk factors. It was also stated that such a committee is
empowered to review and review company information and work accordingly4.
It is further stated by the ASX, that in accordance to the policies of Australian
Security Exchange, the rule of ‘if not, why not’ was established. It allowed the companies to
refuse to follow the laws of ASX, but, in that case, the entity has to provide a valid reason and
explanation. If not, then the company will be penalized with an amount of $250000 for not
following the rules of operation. A breaching of these regulations cost to a penalty of $1000000.
An example can be seen in the case of Sino Australia Oil and Gas limited (Company), which
too was penalized by ASX5.
Judging by what was discussed in the last two paragraphs, it can be said that Ardent
Leisure Pvt. Ltd, failed to follow the Principle 7 of Corporate Governance. The company didn’t
just ignore the factors of risk; it didn’t create a framework that would search for the search for
the factors and work for its most possible mitigation. The case of Dreamworld was most
avoidable one of all but since the company was careless enough, not advancing to the worst case
scenario instantaneously, led to the disaster. If the socio-environmental risks were disclosed
properly, then the incident might have been avoided. So, it can be rightfully said that the incident
occurred solely due to the company’s failure in following the said principles6.
4 Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and practices. Oxford
University Press, USA, 2015.
5 Young, Suzanne, and Vijaya Thayil. "Corporate social responsibility and corporate governance: Role of context in
international settings." Journal of Business Ethics 122.1 (2014): 1-24.
6 Vakkur, Nicholas V., and Zulma J. Herrera. Corporate governance regulation: how poor management is
destroying the global economy. John Wiley & Sons, 2013.

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The above series of events that caused due to the incompetence of the Ardent Leisure
in order to follow the Principle 7 didn’t just leave it financially vulnerable, but also destroyed its
social standing and market power when it came to competition and profits. The company
suffered a financial depression that also included the huge amount of penalty inflicted upon it by
the ASX. Hence, the entity had willing exposed itself to the risk that had might never have
happened to the company in the first place. The Dreamworld incident left a scar upon the face of
Ardent Leisure and decreased its Goodwill value and Net Worth7.
Question C.
It is prudent by the Laws of ASX, that the Directorial board of the will take decisions
that are for the sole purpose of the benefit of it and nothing else. It is said that if a director is a
person of sound intelligence and rational mentality, he can never make decisions that are wrong,
if he wills it8. It can be said that the directorial decisions are absolute and are subjected to the
common laws of the ASX.
The above statutory obligation can be seen in the Section 180 of the Corporations
Act 2001 (Cth), that very frankly states the obligations of the directorial board to act with care
and earnest toward the sole purpose of developing the organization9. Directors who are deemed
incapable of organizing themselves according to rules or are held responsible for a possible
breach can be held into custody by the section 1317 of the Act as a result of the civil penalties. It
7 Hopkin, Paul. Fundamentals of risk management: understanding, evaluating and implementing effective risk
management. Kogan Page Publishers, 2017.
8 Pearson, Gail. "Failure in corporate governance: financial planning and greed." Handbook on Corporate
Governance in Financial Institutions (2016): 185.
9 Corporations Act 2001 (Cth) section 180.

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is further stated that the director can in no way bring personal interest ahead of the interests of
the company and act selfishly.
In the case given to us, it can be clearly stated that Ardent Leisure has clearly failed to
work accordance to the Section 180 of the Corporations Act 2001 (Cth) of the laws of the ASX
and clearly avoided even the creation of the said framework10. In order to prove that the incident
was directly related to stipulated mistakes of the directors, it can be said that it is essential to
prove the fact that the directors committed a breach while being of sound mind and reason that
might clearly have not been the case of any other prudent person.
Since, the prudency of the directors can confirmed, it can be said that the directors of
Ardent Leisure are responsible for the breach of the common law and also the section 180 as it
can be clearly stated that any sane person would have taken precautionary measures as advised
by the ASX. So, the directors are bound to penalized as per stated on the previous sections due to
their failures in dealing with the Dreamworld incident.
Question D.
It was seen that the company, Ardent Leisure Pvt. Ltd took no actions to reach out to
the families of the people who lost their lives after what had happened in the Dreamworld
incident. It is the first person right of a company to contact the families of the dead or injured
when the accident has happened inside the boundaries of its premises. Then again, Ardent chose
to completely ignore that in the first place. After much media back lashing, the company took it
upon themselves to take necessary precautions. The Dreamworld park remained closed for 45
10 Prince , John. "ASIC report: The director's role in corporate governance." Company Director 30.1 (2014): 12.

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days and the the situations was thoroughly examined in order to single out the cause and deal
with it. Then again, the said situation may not have happened if proper measures were made
before hand.
Ardent Leisure had proclaimed itself to be an entertainment company and took it
upon them to spread the entertainment market across the United States. It cannot be denied that
Ardent Leisure was a leading producer in the global economical entertainment market until the
Dreamworld incident took made the company take a turn for the worst. The constant criticism
and backlashes led to the CEO of the company, Deborah Thomas to take her resignation from
her overshadowed by the guilt that was burdened on to her for not taking effective actions11. The
company faced a considerable decline in its stock post the accident and now, it has turned their
attention to involving themselves into the reduction of damage and risk control. The
investigation as a prime objective had commenced since the accident took place.
The ride that led to the fateful event, ‘Thunder River Rapid’ was permanently shut
down and the company has taken it upon themselves to re-establish their industry and to take
precautionary measures with the help of the authorities and few other private sources12. A so
called ‘risk management committee’ was formed after the disaster and was given the sole
objective of looking into the matter of mitigation and risk management. It was made sure that all
the potential risks are identified and dealt with in all caution. Even after such an elaborate
incident, the company denies its total fault and says that it still retains the position of a top
entertainment company in the industry with the help of government policies.
11 Whiting, Rosalind H., and Georgia Y. Birch. "Corporate governance and intellectual capital disclosure."
Corporate Ownership and Control 13 (2016): 250-260.
12 Young, Suzanne, and Vijaya Thayil. "Corporate social responsibility and corporate governance: Role of context in
international settings." Journal of Business Ethics 122.1 (2014): 1-24.

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Reference list
Booth, Simon A. Crisis management strategy: Competition and change in modern enterprises.
Routledge, 2015.
Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles
and recommendations . ASX Corporate Governance Council." (2014).
Council, ASX Corporate Governance. "Corporate Governance Principles and Recommendations,
3rd edn (ASX, Sydney)." (2014).
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.
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.
Price, John. "ASIC report: The director's role in corporate governance." Company Director 30.1
(2014): 12.
Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA, 2015.
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.

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Whiting, Rosalind H., and Georgia Y. Birch. "Corporate governance and intellectual capital
disclosure." Corporate Ownership and Control 13 (2016): 250-260.
Williams, Belinda Rachel, Simone Bingham, and Sonia Shimeld. "Corporate governance, the
GFC and independent directors." Managerial Auditing Journal 30.4/5 (2015): 324-346.
Young, Suzanne, and Vijaya Thayil. "Corporate social responsibility and corporate governance:
Role of context in international settings." Journal of Business Ethics 122.1 (2014): 1-24.