Call to extend personal liability to senior managers
Chartered Secretaries Australia
Senior managers making important decisions should be held liable for any wrongdoing under the corporations law, claims the peak body for governance professionals, Chartered Secretaries Australia (CSA), in a submission to the Corporations and Markets Advisory Committee (CAMAC). CSA says a corporations risk management and compliance systems would be far more robust if managers with hands-on responsibility for implementing these systems were personally held accountable for their actions. The reality in most medium-to-large companies today is that corporate decision making is no longer restricted to directors and officers. Managers, who are not also officers, are making significant operational decisions without direct board involvement, said CSA chief executive, Tim Sheehy. Where managers have been authorised to act in a particular way, good governance dictates that responsibility and accountability go hand in hand, he said. In its submission to CAMAC, CSA specifically calls for: extending the duties to exercise care and diligence, and to act in the best interests of the company, beyond directors by expanding the definition of 'officer' to include senior managers who participate in significant corporate decisions, or who are charged with particular responsibilities, such as mine managers, treasury managers or heads of a division or department, application of the business judgment rule to managers included in this group, extending the prohibitions on the improper use of corporate position and corporate information beyond directors, officers and employees to consultants and contractors acting on behalf of the company, and extending the prohibitions against knowingly providing false or misleading information and against misconduct concerning corporate books, beyond officers and employees, to consultants and contractors acting on behalf of the company. CSA believes that stringent delegation processes and internal education will play an important part in bedding down the new accountability framework. Organisations should clarify which roles attract the new obligations. As part of this process, transparent delegations of authority need to occur and role statements should be continually updated when personnel change jobs within the company, said Mr Sheehy. Mr Sheehy added that training was also part of the equation. Management should identify those who will have new obligations, and train them so they understand their responsibilities, he said. According to CSA, broadening the range of persons subject to corporate duties would not diminish the boards over-arching responsibility for the stewardship of the corporation. Regardless of these proposed changes, boards will remain strictly accountable for setting appropriate policies for the company and making sure they are thoroughly monitored and regularly reviewed, he said.