Directors' Duties and Corporate Governance: Have We Gone Too Far?

Authors

  • Jeff Coulton,

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      Leff Coulton is in the School of Accounting, University of New South Wales. Stephen Taylor is in the School of Accounting, University of New South Wales, and works with Capital Markets CRC Ltd. The authors acknowledge the comments and suggestions of Philip Brown, John Kluver and Vince Jewel.

  • Stephen Taylor

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      Leff Coulton is in the School of Accounting, University of New South Wales. Stephen Taylor is in the School of Accounting, University of New South Wales, and works with Capital Markets CRC Ltd. The authors acknowledge the comments and suggestions of Philip Brown, John Kluver and Vince Jewel.


Abstract

We review recent policy initiatives in Australia, such as corporate governance reporting requirements and innovations in defining directors' roles and responsibilities, and argue that such initiatives are often premised on overly simplistic models of the role played by directors. The role and effectiveness of directors vary according to the economic activity of the firm; hence, uniform guidelines for board composition, for example, are unlikely to be economically desirable. Likewise, statutory definitions of directors' duties are unlikely to be effective unless they allow for directors' roles to vary according to circumstance. Conversely, broad legal definitions will be problematic because of uncertainties in judicial interpretation.

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