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GRC Professional : GRC Autumn 2012
33 has lifted the bar for performance of directors through the interpretation of existing laws, so the standards required of directors are now higher.” australia compared to the world Quinn says it’s important to keep in mind directors’ liabilities in australia are high compared to other countries. For example, a director potentially has the personal liability for debts incur red by a company that is trading while insolvent. he says it’s essential that a balance be achieved between setting high standards for director behaviour and not dis-incentivising people from becoming directors because the requirements and potential liability are too great. “although a company may have the benefit of limited liability, directors don’t and therefore they can put their personal wealth and reputation on the line when agreeing to become a director,” he says. “good directors have become extremely selective about the boards they sit on – but we have to be careful not to lift the bar too high. There is a trend to sheet home more and more responsibility to the board, but we don’t want a situation where good-quality people question whether it’s worthwhile being on a board.” ernst & Young’s assurance leader Tony Johnson says recent court rulings have been a wake-up call for directors, and many boards have made changes around processes to sign off accounts. “asic has been very active in encouraging directors to be professionally sceptical in per forming their roles. But there is a real danger of a knee-jerk reaction to change board procedures, when in many organisations there are already good processes in place and what’s needed is a gap analysis and implementation of specific systems to close those gaps, rather than re-inventing systems altogether.” can legislation strike a balance? an intriguing development that is expected to go some way toward getting the balance right between ensuring directors meet high standards and not lumping directors with too much responsibility is the personal liability for corporate Fault reform Bill. The proposed rules will change liabilities for directors and company secretaries related to the way they carry out their role. The bill is expected to replace criminal penalties for breaches of those functions with civil penalties, and lift penalty rates for breaching civil provisions. “This should ensur e various tasks such as lodging returns, which are not the r esponsibility of directors, but the r esponsibility of the company secretar y, are not automatically considered a responsibility of directors,” says Quinn. X Boards are getting older, with the average age of a non- executive director increasing from 60.5 years in 2009 to 60.8 years in 2010. there is a real danger of a knee- jerk reaction to change board procedures, when in many organisations there are already good processes in place.
GRC Summer 2012
GRC Winter 2012