Company directors back ASIC chief’s concerns on director liabilities

Company directors have backed comments by the outgoing ASIC chief Tony D’Aloisio that non-executive directors face too many regulatory difficulties, and have called for state and federal Governments to take a fresh look at director liability laws as evidence mounts they are proving a disincentive for would-be board members.

Tony D’Aloisio, who comes to the end of his four-year term as chairman of the Australian Securities and Investments Commission this year has told The Australian that the law has “moved too far in imposing obligations on non-executive directors that should be imposed more on executives.”

“As I look at it as a former lawyer, the duty of negligence does look like a very high standard when you consider that board members are advisers and they are not really involved and don’t have the knowledge that management has.”

The Australian Institute of Company Directors says there are 708 separate provisions in state and territory laws imposing personal liability on individual directors for corporate misconduct.

“The burden on directors has become too great, especially when it is considered that they are also dealing with Commonwealth legislation like the Corporations Act, the Trade Practices Act and the tax law,” the AICD said in a statement.

AICD spokeswoman Michelle Wood said there was evidence of board members declining offers and resigning from boards about concerns relating to director liability, noting a 2008 survey which found that laws involving director liability were having a “negative” effect on recruitment and retention, and concerns about liability were also negatively impacting on decision-making.

Of particular concern to AICD are “derivative liability” or “positional liability” laws, which it says are “stifling business, investment and job creation” and in “urgent need of reform.”

“Unlike other defendants, in some cases directors are also required to prove their innocence – a reverse onus of proof -–with no clear statement of duties or defences,” Wood added.