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Process Of Good Corporate Governance

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1.Did the Board of Ardent Leisure recognise and manage the risk arising from this incident?

2.Assuming the Board failed to manage the risk, did the company and the directors breach Principles 7 of the ASX principles of Good Corporate Governance? What is the consequence, if any, for the company failing to comply with Principle 7? Can the ASX take any disciplinary action against the directors and company for failing to recognise and manage the risk in this instance?

3.Could it be argued that the directors had breached their duty of care and diligence or is the significant financial harm suffered by the company sufficient penalty?

4.After the incident did the Board review and improve the effectiveness of the company’s risk management framework?


1.The concept of corporate governance denotes the way through which companies are governed by its officers and directors. According to the principles provided by the concept of corporate governance the organization must be governed by the authorities responsible for its operation in such a manner that it would be able to achieve its objective and goals in the best possible way[1]. The controlling officers namely the executives and the directors must also ensure that the organization comply with the principles of corporate social responsibility and ensure the benefits of its shareholders where the society being one of them. When a company has an appropriate policy for its governance it automatically enhances the trust which the potential and present stakeholders of the company have towards its management. Good corporate governance also enhances the confidence of the investors to make investment towards the organization.

Certain recommendations have been laid down by the Australia Securities Exchange (ASX) so that the companies in organization can carry out the process of good corporate governance in an effective manner. The aims of the provided recommendation are to ensure that the organization is not only able to address its own needs but also the needs of the society. There are seven recommendations which have been provided by the ASX in relation to good corporate governance and such principles are reviewed on a periodic basis in order to eradicate the effect if any. Currently the latest version of the recommendation is the third edition which has been provided by the ASX. Particularly in relation to the seventh principle of corporate governance recommendation in relation to Risk management have been provided for the organizations. The recommendations provided various strategies which the organization may take in relation to mitigating the risk which may cause injury to the society and the company itself because of its operations[2]. The recommendations suggest that the company must have a risk mitigating committee which would have at least one independent director to identify and address risk.  It is a evident fact that if the company is prone to risk and its operations affect the society its reputation will be hampered which would subsequently discourage any investor in associating with the organization[3].


According to the facts of the case it has been provided that the company Ardent Leisure Pty Ltd (Ardent) not only failed to recognize the risk but also to effectively handle its after effects. There were no measures taken by the management of the organization in relation to avoiding the harm which had been caused do to the accident which took place in their Dreamland Amusement park. The lives of four patrons were lost in relation to the accident which took place in the park. In case there was a proper risk management strategy implemented by the company such grave negligence would have been prevented. It is a fact that accidents are not under human control however the root cause of accidents in negligence. In the given situation the company was also criticized for not being able to handle properly the after accident period which caused increased hardship to the relatives of the deceased patrons. In case there was a proper risk management framework as suggested by the ASX the company would have been able to identify and address the risk in a proper way.

2. The ASX does not mandatorily impose any of its recommendations of the company as it realize that specific set of recommendation may not be suitable for an organization as its operations may get hampered. Therefore the organizations in Australia are provided the right to choose their own method of corporate governance in relation to their operations[4]. However the ASX have a very unique principle to ensure that the organizations are accountable towards the process of corporate governance. The policy is known as the ”if not why not” policy. According to the policy of the ASX an organization has to show that why they are not adopting the recommendations provided by the ASX if they feel that it is not suitable for them. Through the process the regulator not only provides for scope for the organization for adopting their own principles but also making them accountable in relation to the process of corporate governance.


Where a company has failed to comply with the provisions of corporate governance as recommended by the ASX they are liable to be imposed with pecuniary penalties. There is no fixed amount of penalties imposed on the organizations as they are determined through the analysis of the breach committed by them. In the recent case as related to Sino Australia Oil and Gas Limited (Company) the ASX was successful in imposing a penalty of $1000000 through the court as the organization was found to be guilty of not complying with the provisions of ASX in relation to corporate governance. In the case of Ardent it has been already discussed above that the organization has not been able to implement proper risk management strategy in relation to corporate governance[5]. It is also evident that the company could have been able to avoid the harm which had been caused to the patrons and moreover would have been able to address the period after the accident in a better way of they had implemented appropriate and adequate risk management strategies[6]. However a careless attitude had been demonstrated by the organization towards its operations which is evident for the absence of any risk management strategies within the organization[7]. It can therefore be concluded that the reason for the death of the patrons and the hardship faced by the relatives of the diseased has resulted solely out of the negligence of the organization in relation to risk magnet strategies. The organization would also suffer losses in relation to reputation and its overall value in the society. This is solely because the organization has ignored the good governance principles and therefore not on the loss of reputation the organization would also be imposed with pecuniary penalties by the ASX for its actions.

3. According to Section 180(1) of the Corporation Act 2001[8] any director or officer who is in control of the organization as per the doctrine of “Directing minds and will” has the responsibility of managing the specific organization with bona fide intentions and towards its best interest[9]. The section also provides a test for determining the liabilities under this section[10]. According to the principles of the test a reasonable director is paced in the position of the director alleged to have breached the section in the same circumstances when the potential breach was committed and then analyze whether the same actions would have been committed by reasonable director or not[11]. In case it is found that the reasonable director would not have committed the action the alleged director is determined to be guilty of violating section 180(1) of the CA.  in the case of AISC V Cassimites one of the issues before the court was to find out whether the extent of application of section 180(1). In answer to such question it was provided by the court that even if the duties under the section are limited only towards the company and not the society, the duty may not only be breached because of financial losses suffered by the company but also the loss of reputation and value in relation to the society. The breach of this section under the CA provides for financial penalties by the directors personally and also may extend to a disqualification from management order under section 206A of the CA.


In the given circumstances it has been provided that Ardent has already suffered various losses in relation to the accident which took place at Dreamworld. The losses are in form of financial losses suffered by the organization as the park was closed for a considerable period of time. In addition the organization had to pay compensation to the family of the deceased as well as suffer losses in relation to reputation and value in the society. In the case of AISC V LINDBERG the court ruled that if a director is found to be not acting in the best interest of the organization and therefore breach section 180(1) of the Act they would be imposed with pecuniary penalties as well as disqualification from management for a certain period. In this particular case the director who was found to be guilty of violating section 180(1) of the CA was imposed with a pecuniary penalty of $100000 along with a disqualification from management period of two years by the court.

In the given issue related to Ardent if the test provided by section 180(1) of the CA is applied it would be analyzed that a reasonable director would have followed the recommendations provided by the ASX in relation to risk management and would have in place proper risk management strategies. Therefore the directors have violated the section when their actual action would have been different from that of a reasonable director. Actual harm which is although not necessary for the breach off the section has been caused to the company as it has suffered losses of value and reputation. Therefore along with the financial and goodwill losses suffered by the company the directors of Ardent are also liable for additional penalties under section 1317E and 206A of the CA.


It has been evident from the above discussion that Ardent did not had in place any policy or strategy to address the issue arising out of the Dreamworld accident. The highlight of the news was that the companies in relation to the post accident stage were grossly incompetent to handle the situation. It not only did not contract the relatives of the deceased but also provided untrue news in relation to the accident[12].  The company had indulged in a defensive mode throughout the post accident period trying to defend it policies and strategies which were grossly incompetent to handle the situation. Reacting to the criticism faced by the organization in relation to its strategies of risk management it has implemented certain new polices into its governance system related to the management of risks. This can also be seen as a result of the constant pressure from media. The criticism also resulted in the resignation of Deborah Thomas the CEO of the organization. In response to the incident the organization closed the park for a period of 45 days in order to appropriately carry on the process of inquiry. The rid which led to the fatal accident has been permanently made out of operation by the company. The company has also established a risk management committee in accordance to the corporate governance recommendations provided by the ASX. The aim of the organization is to be global brand in relation to entertainment and particularly expand its operations in the USA. In addition the company has hired risk management experts from delloitte and a former Queensland policeman to handle the situation the organization is in with respect to the accident. The stock value of the organization has also gone down considerably following the fatal incident.  The organization has been subjected to damage control since the incident took place. This has led the entire company to shift its focus from its core operations towards the management of the incident. The company did not follow the basic rule provided by the ten commandments that in case of any accident the relatives of the affected party has to be contacted[13].

The actions which have been initiated by the organization after the accident cannot be regarded as adequate measures. The company had been focusing majorly on providing explanations for its actions rather than finding out proper measures to address the situation and to ensure any such situation does not take place in the future[14]. This action of the organization has also backfired as its stalk value have been consistently going down.



Baxt, R., and Fletcher, K.L., Fridman, S., Corporations and Associations Cases and Materials on, (Butterworths, Australia, 10th edition, 2008)

Booth, Simon A. Crisis management strategy: Competition and change in modern enterprises.(1st Edition, Routledge, 2015)

Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, (Sydney, 9th edition 2013)

Fisher S, Anderson C, Dickfos, Corporations Law – (Butterworths Tutorial Series, 4th Edition Butterworths, Sydney 2014)

Harris J, Butterworths Questions and Answers Corporations Law:, (LexisNexis, 3rd Edition Sydney 2009)

Harris J, Corporations Law, (LexisNexis Study Guide 1st edition 2008).

Li, G, Riley, S. Applied Corporate Law: A Bilingual Approach  (LexisNexis 1st Edition 2009).

Parker, Clarke, Veljanovski, Posthouwer, Corporate Law, Palgrave 1st edition 2012

Tomasic, R.,Jackson, J.,Woellner, R., Corporations Law - Principles, Policy and Process (4th Edition Butterworths., Sydney, 2002).

Vermeesch,R B, Lindgren, K E, Business Law of Australia (Butterworths, 12th Edition, 2011).

 zpatrick, Symes, Veljanovski, Parker, Business and Corporations Law; (LexisNexis 3rd edition 2017)

ASIC v Matiner Corp [2015] 327 ALR 95 at [144]

Australian Securities and Investment Commission (ASIC) v Cassimatis [2015] NSWSC 1744


Pearson, Gail, ‘Failure in corporate governance: financial planning and greed’ (2016) 13(2) Handbook on Corporate Governance in Financial Institutions 185.


Corporation Act 2001 (Cth)

Dreamworld’S Parent Ardent Leisure Is In Damage Control (2017) NewsComAu

The Guardian. (2017) < › World › Australia › Dreamworld>.


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