AISV : Governance guidelines : 18. Legal obligations of the chair

There is conjecture in legal circles as to whether the Chair possesses responsibilities and legal obligations above and beyond those owed by other Board Members.

18. Legal obligations of the chair

Interpretation of recent case law is divided. Some commentators take the view that the Chair has enhanced legal duties and obligations that arise by virtue of appointment to the position of Chair, and that these additional duties and obligations will vary depending on the specific expertise, qualifications and experience of the particular Chair. An alternative view is that the Chair is the “first among equals” and has no greater legal obligations than any other members of the Board.

Section 180(1) of the Corporations Act dictates that a Board Member must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they had the same responsibilities within the organisation as the particular individual. The Court in ASIC v Rich accepted the argument that an individual can have special responsibilities by virtue of his position within the company and by virtue of any high qualifications, experience and expertise possessed by the individual relative to other Board Members. There were however special circumstances pertaining in that case and bodies such as the Australian Institute of Company Directors have come out strongly against there being any enhanced responsibilities.

“Largely the ‘additional’ duties of chairmen are a matter of common sense and should not give rise to serious concerns by those who are committed to doing a professional job as chairman. Greater risks will lie for those who are not prepared to give appropriate commitment to the job and allocate sufficient time to doing it well.”

Australian Institute of Company Directors – Law Committee