Directors must act as ‘Gatekeepers’
Company directors may have to assume an additional role as leaders of their organisations, with ASIC Chairman Greg Medcraft recently stating that the role of company directors also included an obligation to act as ‘gatekeepers’ of the Australian financial market.
In a speech to the Australian Institute of Company Directors (AICD), Medcraft explained the ‘proper performance’ of a director’s role is to act as a gatekeeper to help ensure:
ASIC has stated that it will closely monitor ‘gatekeeper conduct’ and will hold directors to account for a failure to properly execute their obligations to the companies in respect of which they owe fiduciary obligations. In other words, ASIC will scrutinise whether or not a director complies with their obligations to the company to act in the utmost good faith and to place the interests of the company ahead of their own.
Obligations of Gatekeepers
ASIC has stated that it expects directors to have strong internal audit and compliance functions, and ensure that they implement a ‘culture of compliance’ within their organisation.
The concept of a ‘culture of compliance’ is becoming of increasing importance to ASIC. If ASIC considers that a company’s culture of compliance is lacking, it may see this as a red flag of broader regulatory problems, sparking investigation into company compliance and director liability.
ASIC advises that directors should employ the following principles when acting as gatekeepers:
ASIC advises that directors should ‘go beyond’ what the law requires in order to maintain an effective compliance culture. This involves implementing:
Corporate governance measures should also proactively identify risk, particularly for listed companies. Risk governance standards can be used in formal procedures which are supervised, reviewed and reflected in a company’s culture.
Things to take away
For further information with regards to director’s obligations, please contact: