Company & Securities Law Journal: Civilising capitalism?
All the more so, when they are considered against the background of the Banking Royal Commission’s revelations of widespread corporate misconduct in the financial services area.
In the latest edition of the Company and Securities Law Journal, 38.6, Julia Dreosti, Bimaya De Silva, and Katie Walsh in “A Civil Law Solution to the Social Licence to Operate and Directors’ Duties Conundrum in Australia”, review the halting progress made towards instilling CSR, and the related social licence to operate (SLO) concept, in corporate decision-making. Uncertainty on the part of company directors about how to balance larger considerations with financial ones (the conundrum), is seen as a major explanation.
It is uncertainty due in part, the authors suggest, to judicial interpretations of directors’ statutory duties under s 181(1)(a) of the Corporations Act 2001 (Cth) that uphold the “shareholder primacy” doctrine.
After surveying national and international developments, the authors propose a reform, derived from French experience, of modifying s 181(1)(a) to require directors to consider the social and environmental aspects of the corporation’s activities in making decisions. Should such a reform be made, it will be interesting to see how directors weight those considerations in a context in which, in the authors’ words, “the persistent failure by companies to take into account factors other than profits in decision-making” remains “pervasive”.