The Australian Stock Exchange has issued recommendations for listed companies to make directors and senior executives more accountable to companies and shareholders. Under these proposals, nomination committees would be established, with responsibilities which include assessing the competency of current directors, and shareholders would be entitled to a range of information on proposed directors, such as biographical details, including the competency and qualifications of directors submitted for election.

These proposals aside, directors already have a legal duty of care. The "business judgment rule" protects directors from liability if they make an honest mistake in the conduct of their duties, so long as they can show that their decision was made in good faith and in the best interests of the corporation and that they obtained all appropriate information beforehand. It seems to be clear that this rule will not prevent directors from incurring liability if they fail to exercise due care in making significant decisions.

Reproduced from In Touch With The Law, published by the Law Society of NSW