Business Judgment and Directors' Accountability

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Join Professor Joan Loughrey for the next instalment of the CLARS Law & Business Seminar Series.

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Should the courts review directors’ business judgment? This question has been canvassed extensively in academic literature. Arguments against such review include the dangers of judging directors’ decisions with the benefit of hindsight; the fact that judges lack business expertise and should not, therefore, second guess business decisions; that review of business judgment with liability would deter individuals from becoming directors; or that it would lead to more risk adverse decisions. Arguments for review include improving standards; deterring unfit directors; and, significantly, accountability of directors for harms they have caused through careless decisions.

This paper reassesses the debate, drawing on the findings of a two year Arts and Humanities Research Council funded study Business Judgment and the Courts. This project examined what was meant by business judgment; identified how the courts apply this concept; and assessed to what extent directors’ decisions in England and Wales should be subject to review by the courts. It took into account the position in Australia as well as the US as comparators. We interviewed directors, company secretaries, legal practitioners and judges for their views on these issues, and this surfaced new arguments relating to whether judgments should be reviewed as well as new perspectives on old arguments. The newer arguments centred on an understanding of accountability that looked beyond shareholders and the company. This paper is the culmination of that study and provides conclusions on the desirability of the courts reviewing directors’ business judgment and significance of considerations of director accountability.

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Professor Joan Loughrey , Law, University Of Leeds

Professor Joan Loughrey graduated from Somerville College, University of Oxford, with a degree in Jurisprudence. She qualified as a solicitor in England and Wales and Hong Kong, practising as a commercial litigator before entering academia. Her research focuses on accountability and regulation in the context of corporate governance and the regulation of the legal profession; director's duties; and corporate litigation. Her published work includes a book on the corporate governance role of corporate lawyers, (Cambridge University Press, 2011) and she has published widely in prestigious peer reviewed journals such as the Modern Law Review, the Law Quarterly Review, Journal of Business Law, Legal Ethics, the Journal of Law and Society, and Legal Studies. She was the Head of School, School of Law, University of Leeds, from January 2020-April 2021.

Between 2016-2019 she was the Principal Investigator on an Arts and Humanities Research Council funded project on Business Judgment and the Courts, an inter-disciplinary project between the School of Law, Leeds, and the Management School, Liverpool (project award: £281,517). This resulted in a number of articles one of which, co-authored with Professor Andrew Keay,, ‘The Concept of Business Judgment’ (Legal Studies) was shortlisted for the SLS Best Paper prize.

Commentator: John Fast, Chairman and Chief Executive Officer, Seawick

John Fast is a lawyer and economist. He is currently Executive Chairman of Seawick Pty Ltd, an international specialist advisory firm. Before taking on that role, he was the Founder and Joint Managing Director of the advisory company, Dragoman Pty Ltd and, prior to that, a senior executive with BHP, where he acted in the executive role as Chief Legal Counsel and member of the Policy Committee. John was one of the architects and chief strategists in the formation of the dual listing with Billiton Ltd. He is an alumnus of Monash Law School and began his career as Senior Commercial Partner at Arnold Bloch Leibler, specialising in mergers and acquisitions, corporate law, governance, taxation, trusts and financial planning advice.

Moderator: Professor Jennifer Hill, Bob Baxt AO Chair, Monash Law & Director of CLARS

Professor Jennifer Hill is the inaugural Bob Baxt AO Professor of Corporate and Commercial Law at Monash University Faculty of Law and is the Director of the Centre for Commercial Law and Regulatory Studies (CLARS). Jennifer is an internationally recognised legal scholar in the field of comparative corporate law and governance.

Jennifer is a graduate of the University of Sydney (BA LLB (Hons) and the University of Oxford (BCL). She is a research member of the European Corporate Governance Institute (ECGI) and has held visiting teaching and research positions at leading international institutions, including the University of Cambridge; Cornell University; Duke University; NYU Law School; University of Virginia, University of Texas, and Vanderbilt University Law School.

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Name: Janice Hugo


Phone: 03 9905 3327

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