Do directors need better statutory protection when acting on the advice of others?

Abstract

There is a practical need for company directors to rely on advice and information supplied by others. Theory suggests this is also a most efficient practice that should be encouraged and supported. Failure to do so arguably raises the cost of corporate governance and affects directors’ actions because of the risk of personal liability. When the common law caused the process of delegation and reliance to become problematic, amendments were introduced to the Corporations Act to better protect the practice. This article suggests however that these provisions now actually make the directors’ position more difficult. Ironically they impose more stringent requirements than would have ever been intended. There are currently proposals to review these provisions and others to provide better protection for directors. It is argued however that those proposals would not adequately address the matters raised in the most recent authorities. There is a need for better clarity of principle and process on this issue. This article suggests a way forward that should be designed around more practical considerations and efficiencies.