Course overview
Corporate governance is the structures and processes which affect the way in which businesses - particularly large businesses - are governed and controlled, and the decision-making processes which affect their behaviour. There are inherent difficulties in managing corporate behaviour, and punishing misbehaviour, when dealing with the corporate form. These difficulties have been subject to continual public scrutiny, from the Global Financial Crisis on the 2000s, to the Royal Commission into Banking and Financial Services in the 2010s and beyond. This subject provides analysis of the key legal rules, practices and codes of conduct which collectively contribute to corporate governance in Australia and globally.
Course learning outcomes
- Identify, critically analyse and apply to factual situations the principal duties of company directors and officers under the Common Law and Equity (together, the 'General Law') and the Corporations Act 2001 (Cth) including The duty of care, skill and diligence The duty of loyalty (the 'no profit' rule and duty to 'avoid conflicts of interest') and the duty not to misuse position or not to misuse information The duty to act bona fide (in good faith) in the best interests of the company The duty to act for a proper purpose The duty to avoid insolvent trading under the Corporations Act 2001 (Cth) section 588G The remedies, sanctions and penalties for breaching directors' duties Ratification of breaches of directors' duities Court relief for breaches of directors' duties
- Identify, critically analyse and apply the principal 'law and economics' theories and models of the firm relating to the separation of ownership from management and the role of corporate governance in for-profit firms and banks including How the pre-eminent models balance the interests of 'insiders' and 'outsiders' to the corporation The 'nexus of contracts', agency costs and the Shareholder Model The shareholder wealth-maximisation principle The shareholder primacy model of corporate governance The stakeholder model of corporate governance and The director primacy model of corporate governance
- Identify, critically analyse and apply how these theories and models were undermined in the case of corporate collapses like Enron and Hastie and the APRA Prudential Inquiry into Commonwealth Bank and the Hayne Royal Commission on Banking Misconduct including The structural features of the Enron and Hastie corporate collapses and of banks in pre- and post-GFC times and how they operated at the relevant time and The lessons they provide for regulators, policy-makers, law reformers and corporate actors relating to the sustainability of the corporation or major bank
- Identify and be able to critically analyse the regulation of corporate governance through the 'soft' law mechanism of international/cross-border governance codes and schemes of practice including The Governance Variables which have developed over time and across sectors (international/cross-border and national as well as for-profit firms and major banks) to form the central planks of Governance Codes and schemes for for-profit corporations and Australian major banks
- Identify, critically analyse and apply how individual 'Governance Variables' (governance mechanisms, processes and protocols) operate in the real world to enhance or reduce the effects of corporate actors such as the board, individual directors, the CEO and management on shareholder wealth measures such as firm value/share price, firm operating performance/profit and the probability of earnings manipulation including; The effectiveness of individual corporate Governance Variables in affecting the long-term efficiency and sustainability of the for-profit corporation and Australian major bank; The factors that intervene to reduce the operation and effectiveness of these corporate Governance Variables; The relative importance of individual corporate Governance Variables inter se in reducing (or increasing) agency costs and enhancing (or reducing) the long-term efficiency and sustainability of the for-profit firm and Australian major bank and Core failures of corporate governance for banks - incentives, corporate/bank and risk culture, technology, board structure, composition (independence emphasised at the expense of expertise) and processes and risk identification, assessment, control/management, reporting and escalation. These were exacerbated by complex and opaque bank structures and securitised products
- Apply knowledge of the above corporate governance theories, corporate collapses, governance code regulation, behaviour of individual Governance Variables and misconduct in the banking industry that underlie corporate governance regulation to assess and propose solutions for corporate governance problems for for-profit firms and Australian major banks.
- Communicate factual, structural, economic and legal issues in relation to corporate governance arrangements and problems