Research Articles Base: Corporate Environmental Governance

Corporations act in play

I.             Introduction The question posed by CAMAC generally takes into consideration the issue of corporate disclosure in the ranks of Australian firms. With the Corporations Act in play, the claim posed by CAMAC triggers an issue regarding the role of the directors of the corporation and the consequent elements relations to corporate governance such as issues regarding the shareholders. This study will be taking into consideration the claim of CAMAC regarding the change in the Corporations Act regarding the commission of corporate decisions. In this context, issues regarding corporate disclosure, shareholder primacy, and the duties of the directors are to be considered. II.           Corporate Disclosure Corporate disclosure is a vital device of accountability for directors to the shareholders of the corporation. In accordance with the work of  (2002) the application of corporate disclosure addresses a facilitating function for certain members of the organization: investors, creditors, regulatory agencies, and the general public. It doubles as a function facilitating the executive actions of the said individuals specifically whether or not they are making decisions that would in one way or another have implications to the capital creation of the company. () Furthermore, there are a considerable number of factors to account for corporate disclosure to be effective (2002) indicated several ideas in his work regarding corporate disclosure. He took note of the significance of materiality of the information disclosed. As said in the earlier statements of  (2002), disclosure has a facilitating function for several components of the organization. In the same way, it has a facilitating function in the decision pertaining to investments and other operational decisions by the management of the corporation. Therefore, it is imperative that the information disclosed by the directors is capable of substantially making the stakeholders come up with decisions regarding the internal components of the corporation. This triggers the subsequent principle, clear disclosure. This indicates that the information disclosed to the shareholders should be reasonable such that it would permit them to depict their individual conclusions to which their decisions will be based. ( 2002) In other regimes, legislation supports this standard. Examples of such supporting laws include Article 22(1) of the Listing and Reporting Directive of the European Union and Rule 421(d) of the United States Securities Act of 1933. Both laws point to the significance of the understandability of the information disclosed by the directors and the corporation in general III.         Shareholder Primacy Conventionally, the idea of shareholder primacy has been deemed as the primary mandate of the directors and senior officers of a corporation in the context of corporate law. Specifically, all the “energies” of the   (1995) board should be geared towards the advancement of the shareholders in general. This claim similarly talks about the fiduciary obligation of the board of directors to make the decision making within the organization known to the corporation and its shareholder. ()   A recent study on the corporate governance indicated the general contentions of shareholder primacy.  (2002) indicated that shareholder primacy rests on a couple of general assumptions: (a) the shareholders are the principals “on whose behalf corporate governance is organized;” and (b) it is the shareholders that should be controlling the entire enterprise. These generalizations made by  (2002) basically places the claim of the said principle on the shareholders, being the primary recipients of and even protected by corporate governance, should be the ones making the decisions in the organization, not a privileged few. It also reinforces the claim of  (1995) on his earlier work on corporate governance.   The problem is that what the principle of shareholder primacy reveals what is ideal to the organization. However, the work of  (2002) claimed that in the actual setting, the shareholders entirely do not have any “direct or indirect mechanism of control.” This led him to the hypothesis of the existence of “director primacy” in the real world contrary to what is traditionally claimed as ideal. Based on the said arguments of (2002), the principles presented by traditional corporate law may possibly be progressively becoming obsolete and impractical in the current setting. The value of the shareholders has considerably seen as diminishing by the more contemporary scholars of corporate law. Possibly, the delegation of the decision making power of these shareholders are given to the board of directors such that learned decisions are carried out. However, this study contends that the decision making authority should not be entirely left on the hands of the board of directors. Though it appears that what  (2002) claim is rather in effect already, the actions of these directors should constantly be subjected to the knowledge of the shareholders.   Theoretically, the board of directors of an organization is employed by the shareholders to take into consideration specific elements of the operations of the organization. ( 2002) This means that the shareholders of the organizations have instilled their trust to these individuals to steer their company towards a better position in the industry. The directors are thus accountable to the shareholders, in this respect. According to the Corporations Act of 2001 of Australia, there are inherent responsibilities of the directors not only in terms of making the company acquire a better position in the market, but also to the shareholders. They have to establish that accountable and responsible actions are taken on their part. The state has similarly assisted in the shareholders of a corporation by introducing grater liabilities on these directors and further judicial enforcement on this context. In the Australian setting, the corporate laws instituted have been towards ascertaining the specific liabilities of the directors. In looking at the discussions on the CLERP 9 Act, one realizes these apparent tendencies in corporate law with regards to the duties of the directors to be more accountable to the shareholders. Moreover, these duties that should be carried out by the directors and other officers of the firm are also indicated in Chapter 2D of the Corporations Act of 2001.     IV.        Conclusion Looking at the discussions above, it is the contention of this paper that the Corporations Act should not be changed. The Australian government has been up in arms in seeking improvement in the corporate governance of the country. They accomplished this by law reforms with reference to corporate law in general. Actions such as providing harsh and strict liabilities for the directors of the corporation were among the basic reforms to strengthen the corporate sector of Australia. In the same value, the ways to which the shareholders of the organization is empowered through the strict disclosure policies imposed not only by the regulatory bodies, but also the judiciary and even the legislature, have been a great leap forward in re-establishing the confidence of the public on the corporate sector. This shows that there has been legislation that has been made to clarify and delineate the appropriate conduct among directors to keep the development of the corporate sector in the right path to development. Posing amendments to the foundation of corporate law in Australia is therefore not necessarily the appropriate thing to do.     Credit:ivythesis.typepad.com

Corporations act in play

I. Introduction The question posed by CAMAC generally takes into consideration the issue of corporate disclosure ...