Asic says Australian rules too tough on directors

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Public opinion would suggest company directors be more responsible, not less, but Australian Securities & Investments Commission (Asic) chairman Tony D'Aloisio says there is a risk of imposing too many obligations on board members.

The corporate regulator has called Australia's Federal Government to re-examine the law applying to directors' duties, warning that the current regime could be imposing too many obligations on non-executive directors.

D'Aloisio, in an interview with the Australian, said while the Asic had an obligation to pursue legal action against the directors of companies such as James Hardie, Centro and Fortescue Metals for breaching the law, there needed to be more debate about whether the law was too tough.

"As I look at it as a former lawyer, the duty of negligence does look like a very high standard when you consider that board members are advisers and they are not really involved and don't have the knowledge that management has," D'Aloisio told the Australian in an interview marking the end of his four-year term at the Asic.

D'Aloisio's comments are expected to be welcomed in corporate circles because of heightened concerns about personal liability and the burden of red tape.

A survey by the Australian Institute of Company Directors last year, covering large and small companies, found more than half of the respondents said they knew of other directors who had declined an offer of a directorship or someone who had resigned from a board due to liability concerns.

"Asic enforces the law as we find it," D'Aloisio said.

"There are concerns out there as to whether or not it is going to discourage good people from becoming directors, particularly for the medium- to small-size enterprises.

"And if it does do that, there is an economic concern that, longer term, if those entities don't get top board representation, their ability to put pressure on the big companies may be reduced," he said.

From August 1 last year Asic took control of stockbroker and investment bank trading, and potential legal breaches such as market manipulation. The move followed a decision by the Federal Government to overhaul market supervision.

It also took over oversight of a new consumer credit regime.