[LINK] Hardie's Decision ...

[Frank O'Connor]

At 7:11 PM +1030 18/12/10, Steven Clark wrote:
>On 18/12/10 08:59, Frank O'Connor wrote:
>> 
>>http://www.theage.com.au/business/hellicars-board-ban-overturned-20101217-190uy.html
>>
>>  So,
>>
>>  1. Non executive directors aren't responsible for the actions of the
>>  board's they sit on, unless they have been extensively briefed on all
>>  matters - and they have no oversight responsibility at all.
>This is not new to anyone in/around corporate governance. Directors are
>part of a group. Non-executive directors are just that - they have no
>executive power: they're there to advise, to be part of discussions.
>Those with voting rights have some say. But they're generally not in
>position to *do* much of anything.

Then they serve no purpose. They add no value.

They merely represent an honorarium for doing nothing.

They are parasites on the body corporate.

They are a drain on the company's finances.

>
>>  2. Non executive directors (and presumably their executive brethren)
>>  can sign off on the Minutes of meetings, but that is not to be taken
>>  seriously.
>At law. a non-executive director is quite different to an executive
>director: just as a minister is different from a back-bencher. They have
>no way to exercise direct *power*, and thus are not directly held
>accountable for its exercise.

See above.

>
>To punish someone who could do nothing has long been considered unfair
>by our legal system (drawing that notion from Chancery, via the Church
>... the Church of England).

Under equity (Chancery) isn't the old maxim that you also must come 
to court with clean hands?

I'd love to hear you rationalise how disbursing a company's assets so 
that the mortally ill victims of said company's actions who had been 
awarded damages against it could not recover against it, was in any 
way defensible. How putting the burden of said action on the 
Australian taxpayer was in any way moral, or ethical. How any court 
of equity would view such an action.

>
>>  3. The corporate veil protects everyone who would otherwise be
>>  responsible for the acts or omissions of a company, seemingly without
>>  restriction.
>Not entirely true. There are circumstances where the veil can be
>pierced. In any event, the veil exists, in part, because of the legal
>construction of what a corporation *is*.
>
>It is worth noting that a corporation is a separate legal entity, having
>it's own personality at law: it is a legal person by dint of recognition
>as such under the Corporations Act. Individual *natural* persons, agents
>of a corporation, *can* be held accountable - but generally only where
>their actions are, of themselves, illegal (usually criminal acts such as
>fraud, or murder).
>
>The company is a separate legal entity to the individuals who make up
>it's board of directors, or it's executive. The legal purpose of a
>corporation is to protect the investor(s)' investment(s) in the
>enterprise. For the most part, it is the investors who have the most
>powers to hold corporate officers to account. Though most of those
>powers are designed to address fraud and mismanagement - again, to
>protect the investor(s)' investment(s).

Yes, we know that ... that's what the corporate veil is by 
definition. Factor in little numbers like 'limited liability' and our 
courts' penchant for treating companies as 'persons' entitled to the 
same rights as persons, rather than entities (which is all they are 
legally entitled to) ... and the corporate penchant for tying up 
assets in an chain of ownership that can be 50 or more levels deep 
away from where the liabilities reside, or attaining residency in 
other jurisdictions to avoid such liabilities ... all done with 
impunity and I would argue against the intent of laws made by 
parliament or interpreted by the judiciary, and the situation becomes 
even more complex.

I'm with Shakespeare on this one ... First thing we do, let's kill 
all the lawyers.

>
>To hold a human accountable, you must, under our law, have sufficient
>evidence that the human being in question was personally (and directly)
>responsible for a breach of the law at the time the act (or omission)
>was committed. By sufficient, the law requires either beyond reasonable
>doubt (for crimes), or on the balance of probabilities (civil actions)
>that the person committed the offence. And that has to be the whole
>offence, not part of it.
>
>Proving that, in court, is not as simple as movies or television present
>it to be.

Or as dramatic. As one who took law, and practiced for a few years at 
the bar before the boredom and shame of it overcame him ... I really 
needed that criminal vs civil 101. Everything is so clear now. I see 
why the world is the way it is. I can sleep nights, knowing that my 
world is in the hands of wonderfully moral lawyers and judges, and 
that I don't need to worry about a thing.

>
>>  Hey, with Hardie it looks like the government is picking up the $2
>>  billion tab ... no matter what the politicians say ... so if the
>>  company isn't going to be held to account, why should we hold the
>>  directors to account?
>A lot depends on what you mean by 'hold to account' ...
>>  And what the heck, now that the company is permanently resident
>>  off-shore why should they be held responsible for what happens to
>>  thousands of dying asbestos sufferers in Australia?
>>
>>  The corporate veil, guys. Our judicial system seems to live (and let
>>  thousands of others die) by it.
>No. Our existing system of corporate governance lives by the corporate veil.
>
>Changing *that* will require legislation. Which has been pointed out
>time and again by judges, lawyers, and law reform inquiries.

I reiterate ... the corporate statutes and provisions relating to 
director's liability in this country are reasonably clear. My problem 
with the NSW Court of Appeals in this case is the interpretation they 
chose to put on the responsibilities of the directors (both executive 
and non executive) in a case where decisions had been taken to 
flagrantly avoid the company's responsibilities to victims of 
previous company policies. I am particularly annoyed that said 
victims/creditors are slowly dying and with the 'effluxion of time' 
will no longer be able to recover against the 'person' of the 
company, and that the entity concerned has been rescued by the 
government (because the company can't afford it) so that the taxpayer 
is now paying the bill that was the company's obligation. Hell, I 
would have ordered the winding up of the company and the sale of its 
assets to pay the bills to the victims rather than this.

A drain on the public purse ... but that's 'private industry' in 
Australia isn't it? Capitalise the profits, socialise the losses.

James Hardie has been treated an order of magnitude better than its 
victims in this matter ... and I'd defy anyone to dispute this.

The court has played into the hands of the guilty (and the company is 
guilty by virtue of previous successful legal actions against it), 
and once again failed to protect the innocent and/or the victims - 
mainly because once again it has fallen into the literalist trap so 
espoused by Barwick and his ilk many years ago. Don't look for intent 
in law ... interpret all the words separately and cater to wily 
constructionists. Let the law drift into disrepute, what matters is 
that we keep these actions going and provide work for our brother 
lawyers.

>
>>  The question now remains as to why these people (directors,
>>  politicians, judges etc) are remunerated in any way given that they
>>  are not responsible or accountable or even look to have the
>>  responsibility and accountability applicable to a three year old
>>  child.
>A three-year-old child has far more immunities than any adult.

It seems not. These directors have been immunised against any responsibility.

>
>Directors are accountable to shareholders; politicians to the
>electorate; judges to the legal community.

Under the Corporations Law directors are also responsible to 
creditors of the company, and under certain circumstances can be 
personally sued for debts of the company ... and I'd really like to 
see the Hardie's plaintiffs sue a few of these sods and ruin their 
day. They put in place arrangements to avoid liability, and therefore 
must have been aware that the liability existed at the time that was 
done. The purpose of doing it was obviously to avoid debts, and it 
could be argued that with the directors knew at the time that the 
company could not pay said debts ... which was why they put the 
arrangement in place. That being the case, and given that the company 
by its own admission can now no longer afford to pay its debts, then 
they should be held personally liable for said debts.

I don't think that rationale would fail too many 'reasonable man' 
tests. Do you?

Of course, the moral Australian judiciary would never allow this to 
happen ... I mean how could a pathetic mesathelioma sufferer possibly 
equate with the standing and dignitas of one of their own, one of the 
Boys Club... a Company Director. No ... some legal squirming would be 
required (when have lawyers ever suffered from pride) but that could 
not be allowed to stand.

>
>There are unfair situations occurring everyday. Justice is a complicated
>process. Many held to account feel just as outraged as those who feel
>they haven't 'got justice'. No system is perfect. They're all filled
>with people. People just like us.

Say after me ... The law is an ass.

The law exists to ensure the status quo.

The system exists to protect the strong and oppress the weak.

>
>>  Just another one of those inexplicable facts of life like why we are
>>  hit with penny ante-ing credit card charges by those traders we deem
>>  worthy of our custom, why delivery services never actually deliver
>>  any more (they simply whack a note in your letter-box telling us
>>  where the item can be picked up), why power and utility charges can
>>  increase by a factor of 80% in a year and we just go along with it,
>>  why false advertising and outright lies are de riguer in our
>>  corporate sector, why telecommunications products are so confusing
>>  and comparatively more expensive each year (one would have thought
>>  that the 'efficiencies' the telcom executives boast about would have
>>  led to reduced costs) why bank fees and charges can become so legion
>>  and why both depositors and borrowers can be ripped off on interest
>>  ... the list is legion and, hey ... the apathy of our times I guess.
>Commerce has never favoured the little person, the customer, the 'consumer'.
>
>I'm not sure that everyone is 'just going along with' all these changes.
>But to effect real change requires motivation in political and
>commercial circles. It *can* start with Joe Average Consumer, but unless
>a significant proportion of that population act in concert - and have
>the favourable pen of the Press - the individual will always tend to be
>drowned out by the Behemoths and Leviathans.

Right ... like the current retail kerfuffle. The government has caved 
and will create a commission to ensure that buying online becomes 
less attractive than than buying from local real-estate high profit 
margin based traders. I wonder if the black-smithing industry had 
this sort of help at the turn of last century. Back to burying our 
heads in the sand, and continuing huge profits for our out-of-date 
Boys.

Moral of the story ... it's all Corporate in government and finance 
and industry ... and the people this system is supposed (by low and 
by custom) to be serving are simply looked on as the cash cow which 
will grease the wheels of the current system for time immemorial.

>
>Me, I look to self-help somewhat - but then I am reasonably well
>educated; if somewhat disadvantaged by class and origin (working/middle
>and regional/rural).

Ditto ... but that doesn't stop me from putting it all out there when 
I'm roused. I'm comfortably retired, relatively well off, and living 
by the beach now, but I have been and probably always will be, a 
grumpy old bastard.

>  > We just take it up the ass.
>Tried negotiating with a bank lately?
>>  I love this country ... given a skerrick of a chance our so called
>>  leadership (government, business, financial, judicial or whatever)
>>  will abrogate their duties, rip of those they are supposedly
>>  accountable to, commit all manner of crime and misdemeanor, and
>>  maintain that they are not responsible or accountable for anything
>>  bad that happens of their so-called 'watch'.
>So, they're still human then?
>
>I'm not so sure that so many are so corrupt. Other nations have that
>scourge in far greater excess.

Anyone who looks on it as an achievement to load more cost without 
adding commensurate value on a product or service, in the hope of 
increasing their exorbitantly salaried bottom line, is corrupt. The 
whole argument of capitalism (that I support) is that its the most 
efficient means of production available ... what has happened over 
the last 30 years is that the corrupt have taken over the system, the 
efficiencies have disappeared, and the stresses and strains are 
starting to show.

Problem is that my view of capitalism relied on the integrity of all 
the participants. And I now see that this has all disappeared in a 
morass of short term self interest and corruption.

I fully expect 2011 to be a rather dramatic year for the world and 
our economy ... as the debt crises bought on by a this corruption 
(both private and public) reaches critical mass - and a number of 
shocks to permeate the so-called 'system' as a result. (And just 
because Australia's public debt is low don't think we are immune ... 
we have one of the highest private debt figures in the world, and 90% 
of that is owed overseas, and we live on overseas credit which will 
probably be severely constrained if the crisis in Europe and the 
States goes ballistic - and I believe it will.)

>
>>  Why do we tolerate these clowns? Why do we let ourselves be ripped off?
>A lack of pitchforks and firearms?
>
>Or the busy minutiae of daily life?
>>  Just a rhetorical question folks ... I'm well aware is that the
>>  answer is we get what we deserve.
>I'm not so sure about that. Not everyone has the *means* to affect
>change. But many who do are blissfully (or blessedly?) oblivious to the
>woes of others, caught up as they are in their own misfortunes.
>
>The needle-prick can be a crisis to one who has never known pain. Just
>as yet-another-crushing-blow may be see as one's lot after many, many
>before it.
>
>Australia used to the The Lucky Country, but I suspect we've bought into
>our own insular world views - and perhaps some of the advertising.
>
>Many have become more intolerant, more self-interested as circumstances
>have changed in ways that didn't favour them; or in ways that happened
>to favour them enormously.

I look forward to a big shake-up ...     :)