Christianity and Governance
1. We live in a complex world and nowhere is that complexity more reflected than in our legal system.
2. Every day in every superior court, local council chamber, state legislature and Federal Parliament new laws are being made.
3. In many cases lawmakers are creating rules in response to what seems to be new examples of bad behaviour; or to create new definitions of what is expected of citizens, especially those in positions of trust and responsibility.
4. Developments in company law and in particular the duties of company directors a good example.
5. In their original form companies were simple structures established to regulate and protect small groups of people who had thrown their fortunes together in a joint enterprise.
6. They quickly grew into giant organisations and today we have many companies bigger, richer and more powerful than some nation states.
7. With this growth has come a commensurate increase in the responsibilities of the directors of those companies and in recent times especially, the complexity of the law on the duties of directors.
8. ‘Corporate governance’ has become part of the lexicon and commissions of inquiry into corporate failures or questionable conduct are becoming more frequent.
9. A recent example is Australia’s commission into the behaviour of our banks and financial sector generally.
10. Given what this commission has discovered thus far it is reasonable to expect that, when it finally submits its report to Parliament, there will be a slew of new legislative measures recommended.
11. If so and if the new laws do come, corporate governance will likely become more and more challenging to company directors and those who judge their performance.
12. We already have legislative duties that require directors to:
(a) act with due care and diligence;
(b) exercise their powers in good faith;
(c) avoid conflicts of interest;
(d) avoid misuse of company information;
(e) avoid trading insolvently;
(f) keep accurate and comprehensive books and records;
(g) ensure that the company complies with the law of the land;
(h) ensure, in the case of listed companies, compliance with the ASX listing rules;
(i) avoid corrupting gifts;
(j) declare any interest in proposed transactions;
(k) consider the interests of creditors and employees; and
(l) protect the assets of the company.
13. These are only statements of these duties. Exercising the duties in practice is far more challenging. What is required in any particular situation will depend on the circumstances and the timing of that situation. What is OK today may not be OK tomorrow.
14. So how are directors to cope with this complexity? And what should we as shareholders, creditors, employees, trading partners and community members expect of our directors?
15. Is there a lodestar that will guide directors and the rest of us through the maze?
16. In some ways the teaching comparison of the Old and New Testament may help here.
17. The Old Testament, in Exodus 31:18, gives us the 10 Commandments.
18. The Books of Leviticus and Deuteronomy and the other books of the Pentateuch (the first five books of the Bible) give the laws of Judaism. They are numerous and complex and deal with all aspects of life on earth and mankind’s relationship with God. There are laws on landholding and use, public health, human sexuality, religious observance, clothing and dress, dietary requirements, sacrificial offerings, commercial activity, circumcision and many, many more. All up there are literally hundreds of these laws.
19. What is the purpose of these laws?
20. A simple but reasonable answer would be to provide for a healthier and safer society and a means of joining God in the afterlife by highlighting our need for grace.
21. The New Testament however teaches that these laws are all based on something much simpler and much more powerful.
22. In Matthew 22: 36–40, in response to the question, Teacher what is the greatest commandment in the Law, Jesus replied, “ Love the Lord your God with all your heart and with all your soul and with all your mind. This is the first and greatest commandment. And the second is like it. Love your neighbour as yourself. All the law and the profits hang on these two dimensions.”
23. Jesus’ is message here is very clear, very simple, very obvious. There is no room for argument, spin or interpretation.
24. Love God, love your neighbour.
25. If you do this, it is enough.
26. Whatever else you do, how many others of the 613 statutes of the Old Testament you observe, if you don’t love God and your neighbour it won’t be enough.
27. The intricacies and complexity of the Law has been reduced to two, just two rules.
28. Is there something here we can draw on to simplify the lives of company directors and provide for them and us a lodestar to guide us all through the complexity of company law?
29. I believe that there is and can be drawn from the essence of what we require from all persons in positions of responsibility: honesty and competence.
30. We need our directors to be honest. What does this mean in practice?
31. We need them to avoid conflicts of interest and to declare any interest in a proposed transaction.
32. We need them not to put their interests before those of the company and its stakeholders.
33. We need them to refuse corrupting goods.
34. We need them to consider the interests of employees and creditors.
35. We need them to keep true and faithful records and books of account.
36. We need them not to abuse their powers or to misuse company property.
37. We need our directors to be competent. What does this mean in practice?
38. We need them to exercise due care.
39. We need them to have the skills required to do the job.
40. We need them to take their responsibilities seriously.
41. We need them to exercise proper judgement.
42. We need them to ensure that the company remains solvent and operates within the law.
43. We need them to ensure that the assets of the company protected properly deployed.
44. We need them to ensure that the interests of creditors and employees are protected.
45. Out of all this we can say that there are two and only two duties of directors and that, boiled down to gravy, the law requires directors to be honest and competent.
46. Be that and nothing else matters.
47. If you are honest and competent the purpose of the law will have been achieved: the company and its stakeholders will be protected.
48. If a director fails on either on account of honesty or competence, then whatever else he or she does, their duties as directors will not have been met.
49. In the same way if either or both of the two great commandments are not met then, whatever else is achieved, it will count for nothing.