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Under the various of the provisions of the CA 2001, directors are bound to act ethically, morally and always keeping the best economic and business interests of shareholders, stakeholders and others who have vested interests in the business(Deloitte & Touche, 2014).
What happened in the Centro case is that their signed Balance Sheet showed AUS$ 1.5 billion as non- current or long term liabilities, which, in reality was a short term one. (Deloitte & Touche,2014). Besides, there were guarantees to the tune of $1.75B, after the Balance Sheet dates, which were not disclosed to the shareholders, albeit, which under Corporate accounting laws, needed to be disclosed to shareholders (Deloitte & Touché, 2014).
While the directors pleaded ignorance of expert knowledge of accounting principles and their application in financial statements of accounts, the truth remained that they needed to exercise due caution and restraint of acting with due prudence and judgment, which an ordinary person in the same position would have done under exactly same circumstances. (Deloitte & Touche, 2014).
While senior members of theta Board of Directors, whether executive or non-executive have diverse set of regulatory obligations to companies, on whose Board they serve, it is necessary and important that they are also made accountable and responsible for the documents they have accepted, whether financial statements, or otherwise. Besides, and more significantly, they cannot accept individual and collective liability, on the grounds of either, ignorance of accounting principles, laws or mandate and how these adversely impact upon the current and future operations of the business.
Although all directors are not required to be experts in all facets of the business, they need to have working knowledge about various critical aspects, especially regarding accounting laws, financial and economic interests of companies they serve in various capacities, whether executive, non executive or just sitting directors. Besides and more importantly, they should not conduct their onerous duties and responsibilities based on the advice of others, but need also to apply their own discretion, judgment, insights and non-technical skills when making decisions, especially ones which have long and permanent impacts on future of the company and the impacts their decisions have on future course of the business, especially if they have not taken due pains to critically examine and study the documents given to them for approval, ask relevant questions and then decide for themselves whether they should accept or reject the documents in an unbiased, objective, non-discriminatory and fair manner.
Directors need to keep the best interests of the Boards they serve while seeking and communication executive decisions. They not only need to act in free, fair and equitable manner but also needs to be well aware of the consequences of their own actions and inactions, whether in individual or collective manner. This stems from the fact that even an ostensibly minor error or deviation could prove to have grave consequences in the future, not only for them in their individual capacities as directors, but more so, for the Director Boards, and most importantly, for shareholders who have placed faith, trust and reliance on their corporate stewardship and the due protection, preservation and propagation of their business interests over time.
Deloitte and Touche (2014).The Companies Act Australian ‘Centro-case’ confirms duties of all directors. Retrieved :
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