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Bottomley, Stephen --- "From Contractualism to Constitutionalism: A Framework for Corporate Governance" [1997] SydLawRw 17; (1997) 19(3) Sydney Law Review 277



[*] Reader in Law, The Australian National University. This is an abridged version of a longer piece which is work in progress. I thank John Braithwaite, Saul Fridman, Christos Mantziaris, Philip Petit, Colin Scott, Peta Spender, Michael Whincop, John Williams, and staff at a seminar at the Faculty of Law, Griffith University, August 1996, for valuable comments on an earlier version of that paper. Thanks also to two anonymous referees for comments. Comments not taken up in this paper are under consideration in the longer piece.

[1] I use the term reconceptualisation to indicate that this article is concerned primarily with how we think about the operation and effect of modern corporate law, about how corporations are controlled, and about the standards and principles that govern the exercise of that control rather than with formulating specific law reform proposals (that task comes later). See Dallas, L, Two Models of Corporate Governance: Beyond Berle and Means (1988) 22 J of Law Reform 19 at 115.

[2] Eells, R, The Government of Corporations (1962) at 11. As I explain later in this article, the economic theory of the corporation has developed considerably since Eells wrote this passage. Nevertheless, his sentiment is still relevant.

[3] It was after I had begun to formulate my own thoughts on corporate constitutionalism that I discovered Richard Eells 1962 book, ibid, which argues for an approach that bears the same label. Where indicated, I have incorporated parts of Eells analysis into my own.

[4] See Tomasic, R and Bottomley, S, Corporations Law in Australia (1995) at 286-91. One-person companies, which are now permitted under the Corporations Law, raise issues which lie outside the scope of this article. association,

[5] See, eg, Table A art 66(1). As part of a general plan to eliminate the need for Table A articles, the Second Corporate Law Simplification Bill 1996 proposes that this article be deleted and that a new section in the same terms be introduced into the body of the Corporations Law. That new provision (s226A) will have the same legal effect as the present Table A art 66, and any company will be able to replace the section with an appropriately drafted provision in the companys constitution.

[6] Under the Second Corporate Law Simplification Bill 1996 some of these common articles will be included in the Corporations Law as replaceable rules.

[7] Automatic Self-Cleansing Filter Syndicate Co Ltd v Cunninghame [1906] 2 ch 34 at 44; John Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 at 134. The principle set out in the Automatic Self-Cleansing case has been affirmed by the NSW Supreme Court in NRMA v Parker (1986) 4 ACLC 609 at 613-614.

[8] Indeed, what I call legal contractualism is usually treated as part of the formal legal model. I have separated them in this article in order to highlight the impact of contractualist ideas on corporate governance structures.

[9] As two of the main proponents of this framework point out, the corporate venture has many real contracts: Easterbrook, F and Fischel, D, The Economic Structure of Corporate Law (1991) at 16.

[10] While the s180 corporate contract does not create a director's fiduciary duties, they are imposed within the context of that contract and of the relationships it encompasses: see Glavanics v Brunninghausen (1996) 14 ACLC 345 at 355 per Bryson J.

[11] Section 180(1) uses the term the constitution of a company to refer to these two documents, relying on the definition of constitution in s9. This point is picked up later in this article.

[12] Bailey v NSW Medical Defence Union Ltd (1995) 13 ACLC 1698 at 1717.

[13] Above n12.

[14] There is currently a proposal to introduce a statutory derivative action which is intended to clarify the uncertainties surrounding this particular problem: see Commonwealth Attorney Generals Department Proceedings on Behalf of a Company (Statutory Derivative Action), Draft Provisions and Commentary, (September 1995).

[15] Shalfoon v Cheddar Valley Co-operative Dairy Co Ltd [1924] NZLR 561 at 580.

[16] Their Honours cite Houldsworth v City of Glascow Bank (1880) 5 AC 317 as authority for this point.

[17] The Bubble Act of 1720 was an attempt by the English Parliament to regulate the rapid growth in share speculation. The Act prohibited the formation of joint stock companies unless by an Act of Parliament or Royal Charter.

[18] For more detail see Tomasic and Bottomley, above n4, Chapter 1.

[19] See the discussion of Jordan CJ in Australian Coal & Shale Employees Federation v Smith [1937] NSWStRp 56; (1937) 38 SR (NSW) 48 at 54.

[20] 18 & 19 Vict c 133.

[21] See Patterson, W E, and Ednie, H H, Australian Company Law, (2nd ed, 1971) at 1444. See also Gregory, R, The Section 20 Contract (1981) 44 Modern LR 526 at 528.

[22] Jordan CJ in Australian Coal & Shale Employees Federation v Smith, above n19.

[23] Bailey v NSW Medical Defence Union Ltd, above n12.

[24] (1995) 13 ACLC 1630.

[25] Id at 1635.

[26] See, eg, Forbes v NSW Trotting Club Ltd [1977] 2 NSWLR 515 (holding that a professional punter who was excluded from admission to race tracks controlled by the company could not enforce provisions in the companys articles of association).

[27] See, eg, the oft-cited Eley v Positive Government Security Life Assurance Co [1875] UKLawRpExch 44; [1875] 1 Ex D 20 (holding that a member could not use the articles of association to enforce his rights as the companys solicitor).

[28] Bisgood v Hendersons Transvaal Estates Ltd [1908] UKLawRpCh 51; [1908] 1 Ch 743 at 759 per Buckley LJ.

[29] This, of course, is the result of the rule in Foss v Harbottle [1843] EngR 478; (1843) 2 Hare 461; 67 ER 189.

[30] See above, n14.

[31] Glavanics v Brunninghausen, above n10.

[32] Goodwin v Agassiz (1933) 186 NE 659 at 661 per Rugg CJ, cited and approved by Bryson J in Glavanics v Brunninghausen id at 357 and 361.

[33] Examples from the academic literature include McEwin, I, Public versus Shareholder Control of Directors (1992) 10 Companies and Securities LJ 182; Mannolini, J, Creditors Interests in the Corporate Contract: A Case for the Reform of our Insolvent Trading Provisions (1996) 6 AJCL 14; various articles by Ian Ramsay, including Law and Economics as an Approach to Corporate Law Research? (1996) 3 Canberra LR 48; various articles by Michael Whincop, including A Relational and Doctrinal Critique of Shareholders Special Contracts elsewhere in this issue, A Theoretical and Policy Critique of the Modern Reformulation of Directors Duties of Care (1996) 6 AJCL 72. The seeds for this approach in the process of legislative reform were sown early in 1997 when the Corporate Law Economic Reform Program was launched by the Federal Treasurer: see Australian Financial Review March 4, 1997 at 1.

[34] Agency theory is associated principally with the work of Jensen and Meckling, in particular Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure (1976) 3 Jnl of Financial Economics 305. See also the analysis of neoclassical economic theory in Bratton, W, The Nexus of Contracts Corporation: A Critical Appraisal (1989) 74 Cornell LR 407 at 417ff.

[35] Transaction-cost economics is associated principally with the work of Oliver Williamson see, eg, The Mechanisms of Governance (1996). See also the analysis of institutional economics in Bratton, above n34 at 420ff.

[36] Williamson, id at 171-179. See also Whincop, M, Due Diligence in SME Fundraising: Reform Choices, Economics and Empiricism [1996] UNSWLawJl 20; (1996) 19 UNSWLJ 433 at 453ff.

[37] Williamson, id at 173. See also Bratton, above n34 at 422.

[38] Transaction-cost economics regards the transaction as the basic unit of analysis, while agency theory focuses on the individual agent: Williamson, id at 175.

[39] McEwin, above n33 at 185. Bratton notes that transaction cost theorists, unlike agency theorists, are more prepared to recognise the firm as a discrete organisational unit: see above n34 at 420-1.

[40] Jensen and Meckling, above n34.

[41] Williamson, O, Transaction Cost Economics, reprinted in Romano, R (ed), Foundations of Corporate Law (1993) 12 at 13.

[42] Above n9 at 34. For an argument that fiduciary obligations should not be regarded as hypothetical contract terms see DeMott, D, Beyond Metaphor: An Analysis of Fiduciary Obligation [1988] Duke LJ 879.

[43] There are different versions of this argument. Coffee, for example, argues that default terms can be excluded but only after careful judicial scrutiny of the new replacement terms: Coffee, J, The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role (1989) 89 Columbia LR 1618.

[44] For example, Riley, C, Contracting Out of Company Law: Section 459 of the Companies Act 1985 and the Role of the Courts (1992) 55 MLR 782. For an analysis of the different positions on mandatory and facilitative law in the law and economics field, see Whincop, M, Institutions and Institutional Law: A Unifying Framework for Trusts and Corporations (1996, Griffith University, unpublished paper).

[45] Methodological individualism holds that only individuals ... are responsible, and that corporate action or corporate responsibility is no more than the sum of its individual parts Fisse, B, and Braithwaite, J, Corporations, Crime and Accountability (1993) at 18.

[46] Above n9 at 12.

[47] Brudney, V, Corporate Governance, Agency Costs, and the Rhetoric of Contract (1985) 85 Columbia LR 1403.

[48] Brennan, G and Buchanan, J, The Reason of Rules: Constitutional Political Economy (1985) at 28.

[49] For a revealing sociological study that makes this point, see Jackall, R, Moral Mazes: The World of Corporate Managers (1988).

[50] Ewick, P, In the Belly of the Beast: Rethinking Rights, Persons and Organizations (1988) 13 Law and Social Inquiry 175 at 179 and 181.

[51] Kukathas, C and Pettit, P, Rawls A Theory of Justice and Its Critics (1990) at 32-3.

[52] See also Bratton, above n34 at 439-41, 455.

[53] Wolin, S, Collective Identity and Constitutional Power in Bryner, G and Thompson, D (eds), The Constitution and the Regulation of Society (1988) at 97.

[54] This is despite the obvious similarities between many corporate law and public law doctrines. See, for example, Bottomley, S, Shareholder Derivative Actions and Public Interest Suits: Two Versions of the Same Story? [1992] UNSWLawJl 6; (1992) 15 UNSWLJ 127. See also Griggs, L and Snell, R, Natural Justice An Alternative Ground for Intervention in Corporate Decision-making? [1994] QUTLawJl 2; (1994) 10 QUT LJ 22.

[55] Above n34 at 411.

[56] Id at 464. This is more of a tactical choice than a criticism of the details of Brattons argument.

[57] Stokes, M, Company Law and Legal Theory in Twining, W (ed), Legal Theory and Common Law (1986) at 180.

[58] It is true, as Bratton points out, that economic contractualism is built upon political ideals and assumptions, but they are not explicit: Bratton, above n34 at 419, 428.

[59] Pettit, P, The Common Mind: An Essay on Psychology, Society and Politics (1993) at 284.

[60] Above n51 at 1.

[61] For example, Blumberg, P, The Politicalization of the Corporation [1971] 26 The Business Lawyer 1551; Stevenson, R, The Corporation as a Political Institution (1979) 8 Hofstra LR 39.

[62] Maitland, F W, Introduction to Von Gierke, O, Political Theories of the Middle Age (1938) at ix.

[63] Unger, R M, Law in Modern Society Toward a Criticism of Social Theory (1976) at 193.

[64] This is noted by Latham, E, The Body Politic of the Corporation in Mason, E, (ed), The Corporation in Modern Society (1960) 218 at 219. Bratton notes that Lathams argument typifies the anti-managerialist sentiments of the 1970s: Bratton, above n34 at 414. See also Eells, above n2 at 10; Fraser, A, The Corporation as a Body Politic (1983) 57 Telos 5; Pound, J, The Rise of the Political Model of Corporate Governance and Corporate Control (1993) 68 NYULR 1003. Sometimes the point is expressed by describing corporations as private governments eg, Miller, A S, Private Governments and the Constitution in Hacker, A (ed), The Corporation Takeover (1965) at 117.

[65] Stevenson, above n61 at 40.

[66] Dallas, above n1.

[67] Id at 25-6.

[68] Eisenberg, M, Corporate Legitimacy, Conduct, and Governance Two Models of the Corporation (1983) 17 Creighton LR 1.

[69] Id at 2.

[70] Id at 17.

[71] Morgan, G, Images of Organization (1986) at 321.

[72] Above n68 at 4.

[73] I acknowledge that there are other approaches to political theory which can be considered in this context, most notably some version of social contract theory. Space prevents a more detailed commentary beyond saying that social contract theory has limitations and disadvantages in the context of developing a political approach to modern companies. In so far as it is built upon the ideal of implied individual agreements and agency-based grants of power, then my earlier criticisms about the contractualist frameworks are relevant. In particular, contractarianism is based on the idea that each person must give his or her consent before there can be a legitimate exercise of power over him or her. Thus contractarianism is at odds with the idea of majority rule, in which the non-consent of persons in the minority is disregarded: Scheppele, K and Waldron, J, Contractarian Methods in Political and Legal Evaluation (1991) 3 Yale J of Law and the Humanities 195 at 198, 221. Corporate law presumes that majority rule is the means by which decisions are made within a company. A political theory which cannot accommodate this method of decision-making is therefore of limited use in the corporate context.

[74] Avineri, S and De-Shalit, A (eds), Communitarianism and Individualism (1992) at 2.

[75] I am rolling together the diverse theories of Hobbes, Locke, Madison, Bentham, and Mill. Of course, not all had something to say about the three points made in the text.

[76] Of course, different theorists have different explanations for why and how this system of representation should operate, and of the nature of the relationship between the representatives and the represented. These different arguments involve competing attitudes about issues such as majority rule and voting rights.

[77] This parallels the agency cost problem identified by the economic contractualist framework.

[78] See, for example, Ten, C, Constitutionalism and the Rule of Law in Goodin, R and Pettit, P (eds), A Companion to Contemporary Political Philosophy (1993) at 394.

[79] This is so even if we acknowledge as I think we must the blurred distinction between the public and the private in everyday experience. Whatever the empirical overlap, public and private are conceptual categories that continue to structure our political thought.

[80] Schochet, G, Introduction: Constitutionalism, Liberalism, and the Study of Politics in Pennock J R and Chapman, J W (eds), Nomos XX: Constitutionalism (1979) at 8.

[81] Above n53 at 94.

[82] Id at 98.

[83] See the discussion in the text accompanying n50.

[84] Above n80 at 11.

[85] See above n3.

[86] See the text accompanying n72.

[87] Membership is voluntary in a formal sense (see, eg, s184 of the Corporations Law, referring to a persons agreement to become a member). There is an argument that the social and economic policies of successive Federal governments mean that, today, Australian citizens are more or less compelled to take up indirect membership in companies through the medium of investment trusts, superannuation schemes, etc.

[88] Above n64 at 1009. It is remarkable how often arguments and elaborations of principle in the public law/constitutionalist literature resonate with corporate law doctrines and corporate practice. Perhaps this just supports Frugs point that public law and corporate law are two versions of the same story. See Frug, G, The Ideology of Bureaucracy in American Law (1984) 97 Harv LR 1276.

[89] For example, by expanding the range of actors who are said to constitute the corporation. For arguments in favour of this type of reform see the discussion of communitarian theory in Millon, G, New Directions in Corporate Law: Communications, Contradictions, and the Crisis in Corporate Law, (1993) 50 Washington and Lee LR at 1373.

[90] I hope, therefore, to avoid being charged with inertia of institutional imagination. See Unger, R, Legal Analysis as Institutional Imagination (1996) 59 MLR 1 and Christodoulidis, E, The Inertia of Institutional Imagination: A Reply to Roberto Unger (1996) 59 MLR 377.

[91] Corporations Law, ss9, 180. This usage has been adopted in the Second Corporate Law Simplification Bill 1996, s136.

[92] Berman, H, Law and Revolution: The Formation of the Western Legal Tradition (1983) at 215- 21. See also Eisenberg, M, The Legal Roles of Shareholders and Management in Modern Corporate Decisionmaking (1969) 57 Calif LR 1 at 4.

[93] Of course, this ignores the existence of government-owned companies, as well as the significant impact which private sector corporations have in the public sector. The point is, though, that in our legal system corporations are regarded as presumptively private entities.

[94] There is an argument that this is not the sole legitimate purpose of corporations, and that they should also have regard to public or social interests. This article does not address this argument. For a recent elaboration, see Parkinson, J, Corporate Power and Responsibility (1993).

[95] The identification of a corporate realm is not dependent on the idea that all members must be active participants in that realm. That is a separate issue, discussed later in this article under the heading Deliberative Decision Making.

[96] This is the basic duty of directors as expressed in cases such as Mills v Mills [1938] HCA 4; (1938) 60 CLR 150.

[97] See, for example, Residues Treatment & Trading Co Ltd v Southern Resources Ltd (1988) 6 ACLC 1160.

[98] In this article I omit detailed discussion of what form a corporate constitution takes. It is sufficient to note here that it is partly written including the memorandum and articles together with relevant sections of the Corporations Law and unwritten including common law doctrines and corporate conventions. See also Eells, above n2 at 85.

[99] See the discussion in Part 3A.

[100] The Corporations Law presumes, rather than expressly requires, the existence of a board of directors.

[101] [1906] UKLawRpCh 45; [1906] 2 Ch 34 at 44. See above n7, for further examples of this approach.

[102] [1974] UKPC 3; [1974] AC 821 at 837.

[103] Eells, above n2 at 67. This is the concession theory of corporate status.

[104] What follows is prompted by Bruce Ackerman's theory of dualist democracy: see Ackerman, B, Constitutional Politics/Constitutional Law (1989) 99 Yale LJ 453 [hereafter, Constitutional Politics], and The Storrs Lectures: Discovering the Constitution (1984) 93 Yale LJ 1013 [hereafter, Storrs Lectures]. This is an adaptation, not an application, of Ackerman's ideas. As far as I can tell Ackerman did not intend that his argument should be used in the corporate context.

[105] Indeed, since the First Corporate Law Simplification Act 1995 came into effect in December 1995, proprietary companies are no longer required to hold annual general meetings or statutory meetings (s245(2A)).

[106] Ackerman, Constitutional Politics above n104 at 461.

[107] Compare Schauer, F, Deliberating about Deliberation (1992) 90 Michigan LR 1187 at 1188.

[108] See, for example, Gilbert, M, Introduction in Gilbert (ed), The Modern Business Enterprise (1972) at 20.

[109] Stakeholder arguments come in many forms. One variant is the idea of corporate social responsibility see Parkinson, above n94. Another strand is communitarianism see Symposium, above n89. For critical assessments of stakeholder theory from a law and economics perspective, see Special Issue on the Corporate Stakeholder Debate, (1993) 43 University of Toronto LJ No. 3.

[110] Those non-shareholder interests include the interests of quasi-shareholders, such as holders of redeemable preference shares, and other forms of hybrid debt-equity finance.

[111] The label democratic elitism is taken from Green, P (ed), Democracy (1993), while Held, D, Models of Democracy (1987) uses the term competitive elitism.

[112] Schumpeter, J, Capitalism, Socialism and Democracy (1987 ed) at 271.

[113] Id at 272.

[114] Id at 282.

[115] Held, above n111 at 175.

[116] Schumpeter, above n112 at 295.

[117] Cited in Gerth, H and Wright Mills, C (eds and trans), From Max Weber: Essays in Sociology (1947) at 42.

[118] Weber, M, Bureaucracy, id at 215.

[119] Weber observed similarities in the dependent relationships of directors towards company managers and that between elected leaders and administrators in modern state bureaucracies: Politics as a Vocation, id at 91.

[120] For examples of more detailed critiques see Green, above n111 Part 5.

[121] Michels, R, Political Parties, id at 69. Weber was critical of Michels iron law of oligarchy see Held, above n111 at 156.

[122] The idea of deliberative decision-making is adapted principally from Cass Sunsteins deliberative democracy, especially his discussion on political deliberation: Sunstein, C, The Partial Constitution (1993) at 133-41 (hereafter Partial Constitution). See also Sunstein, C, Democracy and the Problem of Free Speech (1993) ch 8 (hereafter, Democracy). The same caveat applies here as for my use of Ackermans work: see above n104.

[123] Partial Constitution, id at 134.

[124] Democracy, above n122 at 242.

[125] Dewey, J, The Public and Its Problems in Green, above n111 at 122.

[126] See, eg, ss247, 253, 254; Table A art 41(1).

[127] For general meetings, see s249, Table A art 42 [quorum]; ss248, 249 [voting]; s250, Table A art 54 [proxies]; s258 [minutes]. For board meetings, see Table A arts 69-78 [voting, quorum etc]; ss258, 259 [minutes]; and ss231, 493 [requiring board meetings for certain decisions].

[128] See Held, above n111 at 149.

[129] The most commonly cited study here is, of course, Berle, A and Means, G, The Modern Corporation and Private Property (1968, rev edn).

[130] In this way, my idea of deliberative decision-making is narrower than Sunsteins idea of deliberative democracy: see above, n122.

[131] Nor does this necessarily require physical attendance at the meeting proxy voting can, conceivably, be a form of deliberative decision-making.

[132] At this stage I do not offer this as a legal standard. Of course it is well established in corporate law that directors must act in the best interests of the corporation, must avoid conflicts of duty and self-interest, and must exercise active discretion in arriving at decisions. With regard to members, I am not here advocating a return to the common law principle stated by Lindley MR in Allen v Gold Reefs of West Africa Ltd [1900] UKLawRpCh 37; [1900] 1 Ch 656 which was rejected (at least in cases of article amendments leading to share expropriations or giving rise to conflict of interests and advantages) by the High Court in Gambotto v WCP Ltd [1995] HCA 12; (1995) 13 ACLC 342.

[133] Democracy, above n122 at 244.

[134] Buxbaum, R, Corporate Governance and Corporate Monitoring: The Whys and Hows (1996) 6 AJCL 309 at 312.

[135] In other words, deliberative decision-making can do something towards meeting the problems of opportunism and bounded rationality, which are the keys to the transaction cost economics approach to companies: see text accompanying above n41.

[136] See Pateman, C, Participation and Democratic Theory (1970) at 24-5; 42-3. For a contrary view see Bratton, W, Public Values and Corporate Fiduciary Law (1992) 44 Rutgers LR 675 at 695.

[137] This takes us into the realm of industrial and organisational psychology, an examination of which is beyond the scope of this article. For an overview, see Delbecq, A, The Management of Decision-Making within the Firm: Three Strategies for Three Types of Decision-Making in Bass, B and Deep, S (eds), Studies in Organisational Psychology (1972) at 258; Miner, J, Industrial-Organisational Psychology (1992).

[138] The theological metaphor is noted (but dismissed) by Vile, MJC, Constitutionalism and the Separation of Powers (1967) at 15. Sir Anthony Mason has pointed to the artificiality of this three-way division of powers, due to the impossibility of defining each of the three powers in a way that reveals them as mutually exclusive concepts. The Hon Sir Anthony Mason AC KBE, A New Perspective on Separation of Powers, Reshaping Australian Institutions ANU Public Lecture, No. 1, 25 July 1996, at 5.

[139] Locke, J, Two Treatises of Government (1960); Montesquieu, The Spirit of the Laws (Cohler, A, Miller, B and Stone, H (trans and ed, 1989) espec Book XI, Pt 6; The Federalist Papers (1961) espec Nos 4751 (Madison).

[140] On the importance of separations of private power, see Braithwaite, J, On Speaking Softly and Carrying Sticks: Neglected Dimensions of a Republican Separation of Powers, paper delivered at Workshop on Social Theory, Research School of Social Sciences, ANU, September 1996, at 4-5.

[141] (1992) 10 ACLC 933.

[142] Id at 1013 (references omitted).

[143] Id at 1014.

[144] For a more critical assessment of the division of function between board and management than that in the AWA case, see Eisenberg, M, Legal Models of Management Structure in the Modern Corporation: Officers, Directors, and Accountants (1975) 63 Calif LR 375.

[145] Above n141 at 1014. Rogers CJ Comm D went on to distinguish between the standard of care owed by non-executive directors and that owed by executive directors. The Court of Appeal rejected this distinction- see Daniels v Anderson (1995) 13 ACLC 614 at 662.

[146] Of course there are other difficulties, such as time and information constraints.

[147] This list is taken from Australian Investment Managers Association, Corporate Governance: A Guide for Investment Managers and a Statement of Recommended Corporate Practice, (1995, AIMA).

[148] See the literature reviews in Stapledon, G and Lawrence, J, Corporate Governance in the Top 100 An Empirical Study of the Top 100 Companies Boards of Directors 1996, Centre for Corporate Law and Securities Regulation, University of Melbourne; and Lin, L, The Effectiveness of Outside Directors as a Corporate Governance Mechanism: Theories and Evidence (1996) 90 Northwestern U LR 898.

[149] Above n134, on the importance of audit committees in US corporate governance.

[150] Above n141 at 1015.

[151] Not all companies are required to have their financial accounts subjected to an annual audit small proprietary companies (as defined) are excluded from this obligation by ss283-283C Corporations Law. However, in the discussion above the idea of an audit includes voluntary audits as well as non-financial audits (eg environmental audits).

[152] In addition to the AWA case, above n141 , see eg, Royal Commission of Inquiry into the Activities of the Nugan Hand Group, Final Report Vol 2 (1985), Special Investigations into Affairs of the Trustees Executors & Agency Company Ltd and Related Corporations; Fourth Interim Report, (November 1985); McCusker, M, Report of Inspection on a Special Investigation into Rothwells Ltd (1990).

[153] Tomasic, R and Bottomley, S, Directing the Top 500: Corporate Governance and Accountability in Australian Companies (1993) at 100-101: see also the comments of Moffitt J in Pacific Acceptance Corporation Ltd v Forsyth (1970) 92 WN (NSW) 29 at 131.

[154] Schmidt, L, Auditors begin to feel the warm winds of change (March 25 1996) Business Review Weekly 70-3.

[155] Power, M, The Audit Explosion, (1994) at 6. See also Power, M, The Audit Society in Hopwood, A and Miller, P (eds), Accounting as Social and Institutional Practice (1994) at 317.

[156] Power, The Audit Explosion, id at 26.

[157] There are other separations which can also be considered, eg, the role of institutional shareholders in the general meeting: see Stapledon, G, Institutional Shareholders and Corporate Governance (1996).

[158] Vile, above n138 at 18-19.

[159] Above n140 at 39.

[160] Above n57.

[161] See, eg, above n33.

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