Guilty until proven innocent, why would you want to be a company director?
Are you the member of a board, would you like to venture into the area of board representation. Suelen McCallum shares her concerns about the way board members are expected to operate.
It seems like more and more time in the working day is spent on working in the business, and not on the business. And lately it seems that more and more time is spent either justifying your own position in the company or justifying the actions you have taken. None more so than if you are a director of a company (or two!).
I am clearly not alone in that opinion – former Future Fund chairman David Murray recently was quoted (“Leaders must restore our freedom to improve productivity”) as saying that in areas of the law including employment, safety, environment, competition and tax, company directors can be assumed guilty until proven innocent because a reverse onus of proof has become common, and often without the proper application of the rules of evidence in a proper court.
From my viewpoint and background in corporate distress and turnaround, I can see not only the increased pressure on directors as a result, but also the effects that this will have on their organisations, so it’s time to stand up on my soapbox and give my opinions on the matter – and hopefully generate some debate and discussion at the same time!
There seems to be an expectation that company directors are out to do us wrong. Take for example the recent tax changes – from the end of June this year, directors face a series of new obligations and challenges, including being held personally liable for unpaid superannuation, greater difficulty in wiping out personal liabilities and the denial of PAYG credits in certain circumstances. Most of these liabilities or burdens will be imposed automatically if the company liabilities remain unpaid and unreported three months after they were due.
More and more, I see directors spending more time managing these types of issues rather than spending their time on what they should be doing – and that is steering the company ahead and generating wealth through good times and bad times, and developing strategies for growing the business. Indeed, larger organisations have inhouse financial controllers and financial officers whose role is ensuring that such things as tax lodgements are made on time. Now, though, in order to minimise their risk, directors are obliged to double check that the work has been done, and that just seems ridiculous.
I have no issue with the agencies such as the ATO making the moves to try and chase company directors who deliberately or carelessly (and frequently) ignore their responsibilities and obligations. However, in reality there are very few company directors who lie in bed at night thinking up ways to defraud employees, suppliers and government authorities. The heavy handed approach to knocking out phoenix activity has, I believe, had the opposite effect of stifling entrepreneurial activity, especially in the SME sector. It has pushed board members towards risk aversion as a priority rather than looking after the company. And isn’t that then starting to make directors less able to fulfil their statutory duties which put the company first? I think the legislators have got it backwards – instead of treating them like potential criminals they should be encouraging board members to use experts and advisors to guide them through tricky decisions.
Suelen McCallum is the CEO of dVT Consulting a member of the de Vries Tayeh group. dVT Consulting specialises in corporate strategy and turnaround management, particularly in the SME sectors, as well as due diligence, litigation support and business succession.
