As touched upon in Chapter 1, contemporary commentary on corporate governance can be divided into two main approaches: stakeholder primacy, and the narrower shareholder primacy. This chapter focuses on the first of these objectives. We commence the chapter by pointing out that an approach that accentuates the differences between a shareholder versus a stakeholder theory of the corporation is probably a contradiction and a false dichotomy. We then deal with the important aspect of corporate social responsibility (‘CSR’) and the related issue of disclosure of and reporting on non-financial matters. As part of this discussion we focus on the controversial and highly topical issue of companies exaggerating their image as environmentally friendly corporations (greenwashing) to please investors and to attract more investments, as well as smartening their image on other issues (greenscreening). This chapter then looks at the ‘social licence to operate’ before shifting to CSR and directors’ duties. The chapter concludes by considering the meaning of ‘stakeholders’ and how all corporate stakeholders have vested interests in the sustainability of corporations.

This chapter opens with a brief discussion of the nature of business ethics, its significance for corporations and the ethical dimensions of a corporation’s stakeholder relationships. The next section is focused on the causes of ethical problems: bad apples, bad cases and bad barrels. In order to examine these it presents the theory related to each before drawing on three case studies: the HIH failure, the LIBOR case and the destruction of Juukan Gorge. The extent to which we attempt to encourage ethical conduct is discussed in the following section. In particular, that section examines corporate accountability, individual accountability and organisation-level approaches that seek to shape the ethical conduct of corporations. The final section is devoted to some concluding remarks.

Since at least 2018 there has been a major shift within ‘Business America’ away from ‘shareholder capitalism’ towards ‘stakeholder capitalism’, a move which has already had some global impact. Our approach is, however, realistic and we also make the reader aware of the challenges for countries, particularly where shareholder primacy is deeply embedded in statutory law and case law, to move from shareholder primacy to an all-inclusive stakeholder model of corporate law and corporate governance. In this chapter we extract some of the ‘essential’ principles of corporate governance and illustrate that there is a ‘business case’ for good corporate governance. We conclude the chapter by discussing broader trends and debates with a present and likely future impact on corporate governance. These include what can be described as the ‘Fourth Industrial Revolution’; the widening gap between the ‘rich’ and the ‘poor’, or, put differently, ‘the price of inequality’; the growing problem regarding profit-sharing or capital distribution in large public corporations; and a short discussion of the so-called ‘Great Reset’.

Historically, the power to manage the business of all companies and corporations was conferred upon the board of directors. The fact that it was impossible for a board of directors to manage the day-to-day business of large public corporations was only openly acknowledged in the past three decades. This chapter focuses on the organs of a company and then discusses the main functions of a board of directors. It is clear that there is an important distinction between managing the business of the company and directing, supervising and overseeing the management of the business of corporations in large public companies. The board is responsible for directing, supervising and overseeing the management of the business of corporations. Managing the business of large public corporations is normally left to management, but under control of the board.

No matter which corporate code of conduct or corporate governance framework is used, the issue of ‘transparency’ is referred to, either directly or by implication. The application of ‘transparency’ to corporate reporting practices, covering both financial and non-financial conduct and performance, has come under increasing scrutiny from various stakeholder groups. The single most significant reform, to date, in this area in Australia came in response to the high-profile corporate collapses of the early 2000s. On 1 July 2004, the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) came into effect. This Act is commonly referred to as ‘CLERP 9’, as it was the ninth instalment under the government’s Corporate Law Economic Reform Program (‘CLERP’). CLERP 9 is broadly consistent with, and a complement to, the ASX Corporate Governance Principles and Recommendations, now in its fourth edition (2019). The aim was for the two documents together to promote good corporate governance practices within Australian listed companies and achieve effective regulation.

As a general rule, directors owe their duties to the company as a whole, not to individual shareholders. Historically, directors’ duties and liability were discussed under general law duties (duties at common law or in equity); subsequently, they were added to under statutory duties. Under general law duties, most courts and commentators usually draw a distinction between equitable duties based on loyalty and good faith, with a particular focus on fiduciary duties, and the duty to act with due care and diligence (the duty of care). The duty of care may arise under principles of equity and at common law, in both contract and tort. Fiduciary duties in Australian law are proscriptive, not prescriptive. That is, the duties prohibit the fiduciary from engaging in particular conduct rather than prescribing what the fiduciary must do in particular situations. The failure to act in a reasonable manner has traditionally fallen within the domain of the duty of care, whereas behavior which falls foul of principles of loyalty is addressed more clearly in equity.

In this chapter we establish the foundations for extracting principles of contemporary corporate governance. We begin the chapter by providing our own definition of the term ‘corporate governance’. The reason for this is to enable the reader to gain a good understanding of how we approach the principles of contemporary corporate governance in this book. We have adjusted the definition of corporate governance in each of the previous four editions, as well as in this edition. The reason is that corporate governance is a dynamic concept and we strive to keep the definition updated to reflect contemporary principles of corporate governance.

In the previous chapter we saw that modern community expectations require that all types of directors fulfil their duties of care and diligence meticulously. No longer may directors hide behind ignorance or inaction; nor are the duties of non-executive directors seen as being of an intermittent nature. All directors have a positive duty to challenge, inquire and investigate when controversial or potentially risky matters are discussed at board level. In this chapter we see that there are various types of company directors and officers, although the basic position is that the law will expect the same duties of all directors and that senior employees and senior executives owe duties to the company comparable to those of directors.

It will be clear from Chapter 4 that we consider regulation of corporate governance to be prominent in a good corporate governance model. This chapter builds upon that model by focusing on the regulation of corporate governance in particular. It deals specifically with the various mechanisms, legislative and non-legislative, which regulate the corporation and which set in place, collectively, a framework by which good governance can be achieved. Overall, this collective body of mechanisms forms part of what has recently been described as an emerging ‘law of corporate governance’. The regulation of corporate governance in Australia is achieved through binding and non-binding rules, international recommendations and industry-specific standards, the commentaries of scholars and practitioners, and the decisions of judges. The legislature acts to facilitate the achievement of good corporate governance directly by refining corporate law, and indirectly through the entire panoply of rules and regulations which have an impact on the corporation and its activities. There are other agencies that also assume a role in the regulation of corporate governance.

Australia has a long tradition of shareholder activism. What has changed in recent years is the nature of the shareholders who are taking activist positions. Institutional investors have always exercised some measure of influence over the management of large public corporations, but recent developments in shareholder activism have brought these manoeuvres into the public spotlight. Australia’s corporate landscape has featured a range of high-profile boardroom battles with activist investors. This chapter explores the nature and scope of shareholder activism in Australia (including reference to international developments) and its implications for corporate governance.

In this chapter we give a brief overview of corporate governance in the United States (‘US’), the United Kingdom (‘UK’), New Zealand, Canada, South Africa, India and Singapore, some of the major Anglo-American corporate governance jurisdictions that are based on the unitary (one-tier) board model. In Chapter 12 we deal with corporate governance developments in the European Union (‘EU’), the G20/OECD Principles of Corporate Governance, and corporate governance in Germany, Japan and China. The Principles include traditional Anglo-American corporate governance principles but go wider – as well as principles applying to a traditional unitary board structure, they include principles applying to a typical two-tier board structure.

In this chapter the focus is on corporate governance developments in countries where the two-tier board system is used. The number of EU member states with different corporate law systems makes corporate governance harmonisation quite difficult, but also leads to very interesting and dynamic discussion within the EU. The G20/OECD Principles of Corporate Governance cover board structures. Germany has a two-tier board structure with employee representatives forming part of the supervisory board. Elements of the German corporate governance model influenced the original Japanese corporate governance model, but Anglo-American influence emerged after World War II. China has a unique corporate governance model because Chinese corporations were traditionally state-owned and many major corporations are still either state-owned or state-controlled. Nevertheless, elements of both the German model and the Anglo-American model, especially as far as independent, non-executive directors for listed companies are concerned, have influenced the Chinese corporate governance model.

The essay studies four aspects of Buridan’s use of principles in his logic. (1) Some principles, such as being said of all or of none, are taken over from the tradition but applied with some qualifications: for example, certain modal syllogisms governed by this principle are said to be “quasi-perfect.” (2) Some principles not used by Buridan’s realist predecessors are introduced, for example, Things that are identical with one and the same thing are identical with each other. (3) Some principles familiar from the tradition are put to powerful new uses, for example, In every pair of contradictories, one is true and the other false, and it is impossible for both to be true together or for both to be false together; again, every proposition is true or false, and it is impossible for the same proposition to be true and false together. (4) Some principles, taken from Porphyry, the Categories, and the Posterior Analytics, which were used by realist logicians to connect the theory of genus and species with the theory of modal syllogisms, are no longer used in that way. It seems that (1)–(3) have the effect of making the theory of consequences (and thus the syllogistic) more “scientific,” while (4) has the effect of separating the theory of consequences from the logical theories contained in the books of the Organon other than the Prior Analytics. If this is so, then Buridan’s logic marks an important stage in the emergence of modern conceptions of logic. A further question is how all of this relates to Buridan’s professed humanistic conception of logic as an art – not a science – “just as the leader is the savior of the army, so reasoning with learning is the leader in human life, whether that life be contemplative, namely, speculative, or active.”

As scholars and activists seek to define and promote greater corporate political responsibility (CPR), they will benefit from understanding practitioner perspectives and how executives are responding to rising scrutiny of their political influences, reputational risk and pressure from employees, customers and investors to get involved in civic, political, and societal issues. This chapter draws on firsthand conversations with practitioners, including executives in government affairs; sustainability; senior leadership; and diversity, equity and inclusion, during the launch of a university-based CPR initiative. I summarize practitioner motivations, interests, barriers and challenges related to engaging in conversations about CPR, as well as committing or acting to improve CPR. Following the summary, I present implications for further research and several possible paths forward, including leveraging practitioners’ value on accountability, sustaining external calls for transparency, strengthening awareness of systems, and reframing CPR as part of a larger dialogue around society’s “social contract.”

This chapter introduces the central questions that are explored in the book. Not only do legal systems enforce morality but they ought to do so. The legitimacy of legal prohibitions on a host of moral wrongs such as murder, rape and burglary is widely taken for granted and not subject to serious dispute. Since legal systems do and ought to enforce morality, the interesting question is not whether the law should enforce morality. The interesting questions concern what parts of morality the law ought to enforce, the considerations that justify its enforcement, how the law ought to enforce morality, the relationship between the legal and social enforcement of morality and whether there are moral limits that constrain the enforcement of morality, and if so, what are the nature and justifications for these limits. In the course of introducing these questions, the chapter distinguishes different senses of enforcement, as this notion applies to both legal norms and social norms more generally. It distinguishes a broad from a narrow understanding of morality and further distinguishes critical from social conceptions of morality. The chapter concludes with a brief discussion of the relation between principled limits on the enforcement of morality and pragmatic reasons for imposing such limits.

The moral foundations of crisis response seem simple: responders save lives, reduce human suffering, and pursue a lofty societal goal. Yet, crises often produce morally complicated situations as well. Crisis organizations have adopted norms, which help responders to work in complex moral contexts, but these norms cause moral distress when responders do not fully agree with them. Responders can choose to deviate from the norms and follow their inner moral convictions instead. This will not remove the moral complexities of their work though. Rather, it means that crisis professionals have to resolve moral dilemmas on their own and bear the full weight of moral responsibility. The moral dilemma for responders concerns this tension between following organizational norms and their own convictions. In response, crisis organizations could pursue an ethical culture by promoting organizational deliberation on moral questions in crisis operations. Creating an ethical culture allows for an open, flexible attitude by enabling active dialogue and collective reflection on moral dilemmas in crises. It facilitates a confrontation with the inevitable moral discomforts of crisis response.

In our modern times, it can feel like we have lost a sense of right and wrong, adding to feelings of fear and uncertainty. In this chapter we talk about how many of the resilient people we interviewed, including United States service members who were Vietnam War prisoners of war, used their moral compass to emotionally survive life-threatening situations. Building up and sticking to a moral compass takes practice, good role models, and a willingness to do the “right thing” despite personal consequences.