CHAPTER 2 Accounting in society 63- Superannuation Industry (Supervision) Act 1993
- Superannuation (Resolution of Complaints) Act 1993.
It is generally accepted, however, that corporate governance extends beyond the law to include a con-
sideration of best practice and business ethics. The structure of corporate governance as put forward by
Farrar (2005) and represented in figure 2.3 illustrates this relationship. When considering this relation-
ship, it is worth remembering that a corporation is an artificial entity that has ‘no physical existence,
sentience, thought or will’ (Shailer 2004, p. 1). The decisions and actions of a corporation are made
by humans acting as representatives of the corporation. Thus, the perceived purpose of a corporation is
as varied as the humans who interact with it. The issues surrounding the rights and responsibilities of
corporations are complex and ever changing as the financial markets become more global, corporations
become larger and more powerful, and society’s perceptions of the corporate role develop. The GRI
reporting framework outlined earlier would fall into the category of ‘statements of best practice’. It is
not a legal requirement for an entity to report on sustainability but many are doing so as such reporting
is being demanded increasingly by the community.
Business ethicsLegal
regulationAustralian Securities Exchange
(ASX) Listing Requirements and
Statements of Accounting PracticeCodes of conduct
Guidelines
Statements of best practiceFIGURE 2.3 The structure of corporate governanceSource: Farrar, J 2005, Corporate governance: theories, principles and practice, 2nd edn, Oxford University Press,
South Melbourne, p. 4.
Generally, the corporate governance responsibilities rest with the board of directors. Both large public
companies and small to medium private entities have directors. They are usually given broad powers to
make decisions on behalf of the entity through the entity’s constitution. The Corporations Act regulates
companies generally, and specifically details the duties and responsibilities of company directors.
Specifically, directors owe the following legal duties to their company:
- to act in good faith, in the best interests of the company
- to act with care and diligence
- to avoid improper use of information or position
- to avoid conflicts between their role as a director and any of their personal interests.
In addition, the Corporations Act specifically identifies numerous duties, responsibilities and potential
liabilities. A common example of the latter is the personal liability that directors risk by allowing their
company to continue to trade while it is insolvent.