Jennifer G. Hill

Why Did Australia Fare So Well in the Global Financial Crisis

Some jurisdictions weathered the global financial crisis far better than others. Australia has attracted much attention in view of the fact that its economy performed particularly well during the crisis compared to the United Kingdom and the United States. The chapter explores why the Australia fared so well in the crisis compared to these other common law jurisdictions. A stock answer to this question has been that Australia was “lucky”, in that its economy was buoyed by China’s growing demand for resources. Although strong trade links with China undoubtedly constituted part of the puzzle in this regard, this chapter argues that there are a number of other relevant, but under-appreciated, factors which contributed to Australia’s resilience during the crisis. These factors include monetary and fiscal policy; legal structures and reform; financial market regulation; banking history; and corporate governance. The chapter explores these specific factors from a comparative perspective, demonstrating key differences in their operation in Australia during the crisis. Australia’s experience of the global financial crisis is a reminder that financial markets do not operate in a vacuum, but rather form part of a complex economic, legal and regulatory ecosystem.

Evolving 'Rules of the Game' in Corporate Governance Reform

While post-scandal reforms in the USA, UK and Australia were prompted by similar motivations, interesting differences in terms of their focus and structure still resonate in current corporate governance debate. The unique contours of the various regulatory responses challenge not only the traditional convergence hypothesis, but also the idea that a unified common law corporate governance model exists. Rather, a fluid, dynamic and increasingly fragmented picture of corporate governance has emerged. Within this developing corporate governance framework, various jurisdictions are able to test regulatory techniques and learn by their own trial and error, and that of other jurisdictions.

Remuneration Disclosure in Australia and the United States

This precis is from Research Paper #1/96, by Jennifer Hill, and published by the Australian Investment Managers’ Association, 1996. It supplements, as a matter of record, the conclusions of the UK report of a study group chaired by Sir Richard Greenbury, and published in Corporate Governance – an international review.

Evolving Directors’ Duties in the Common Law World

Legal scholars have long discussed the gap, or “acoustic separation”, between stringent standards of conduct (“conduct rules”) and more lenient standards of review (“decision rules”) in legal regulation. This gap has been particularly stark in the United States in relation to directors’ duty of care.The goal of this chapter is to explore a range of developments relating to directors’ duties across several common law jurisdictions, including the US, UK Australia and Canada against the backdrop of conduct and decision rules. For example, contemporary Australian case law on the duty of care and diligence, although highlighting the ongoing tension between conduct rules and decision rules, diverges from US law in many key respects. Also, under Australia’s regulatory model, the Australian Securities and Investments Commission (“ASIC”), the primary corporate regulator, operates as the main enforcement mechanism for breach of directors’ duties.Finally, the chapter assesses some recent developments in the common law world on the perennial issue of to whom directors owe their duties, and the extent to which stakeholder interests can, or must, be taken into account in board decision-making.

Regulating Executive Remuneration after the Global Financial Crisis: Common Law Perspectives

Executive pay has become a regulatory flashpoint of the global financial crisis. In contrast to the traditional non-interventionist approach to executive compensation, it has galvanized regulators around the world to search for effective responses to the perceived problem of executive pay. These developments have also shifted the focus of research in the area of executive pay. Although since the 1990s, there has been much research on the determinants of executive pay, there was far less on policies to control executive remuneration. The global financial crisis has altered this. Executive compensation is once again portrayed as a corporate governance problem in search of a solution. This chapter for the Research Handbook on Executive Pay, a forthcoming book on international executive compensation to be published by Edgar Elgar Publishing, explores a range of responses to the global financial crisis concerning the regulation of executive pay in three common law jurisdictions - the United States, United Kingdom and Australia.

Directors’ duties and legal safe harbours: a comparative analysis

Directors’ duties are a core element of corporate governance, yet a range of legal safe harbours ultimately shape the contours and stringency of these duties in practice. Although the standards of conduct that constitute directors’ duties (so-called ‘conduct rules’) are often relatively strict, legal safe harbours can dilute those rules, resulting in the application of more lenient standards of judicial review (‘decision rules’). The potential gap between conduct rules and decision rules, which has been labelled ‘acoustic separation’, is particularly striking in the context of the duty of care and diligence (‘duty of care’). Directors’ duties and legal safe harbours can also involve complex interaction between equitable and common law (‘general law’) principles on the one hand, and statutory regimes on the other. This paper explores, from a comparative law perspective, differences in the shape of directors’ duties and the legal safe harbours that accompany those duties. The paper examines directors’ duties in the United States (focusing on Delaware law), the United Kingdom and Australia. It considers the nature, operation and enforcement of directors’ duties in these three jurisdictions, with particular attention to the duty of care and two related legal safe harbours - the business judgment rule and exculpatory clauses. The chapter explores how differences in relation to these various aspects of directors’ duties can alter ‘acoustic separation’, by expanding or reducing the gap between conduct rules and decision rules concerning directors’ duties. This issue has a direct bearing on the effectiveness of directors’ duties as a regulatory technique in the United States, the United Kingdom and Australia.

Images of the Shareholder – Shareholder Power and Shareholder Powerlessness

This chapter argues that effective regulation requires legal paradigms that accord with commercial reality, yet that some shareholder images are today seriously outmoded, and used selectively, inconsistently and used to achieve particular ends. The chapter assesses recent regulatory developments in the light of major changes to capital markets, whereby institutional investors are now the dominant shareholders in many parts of the world, and argues that regulation is still playing catch-up with this new commercial reality. The chapter shows that shareholder power can be viewed in a positive or negative light, and explores a range of contemporary regulatory issues against this backdrop. These issues include, for example, the implications of investor ‘sophistication’ in the light of the Goldman Sachs’ Abacus scandal during the global financial crisis. The chapter also discusses the significance of shareholder image for judicial decision-making, and considers several cases, including the Delaware Supreme Court decision, Kahn v M& F Worldwide Corp (2014). Finally, the chapter examines regulatory developments based on the view that shareholder power is a positive corporate governance attribute, such as (i) the UK Shareholder Stewardship Code; and (ii) increased shareholder participation in the regulation of executive pay.

Research handbook on shareholder power

Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Yet, as this Handbook shows, there have been major shifts in capital market structure that require a reassessment of the role and power of shareholders. This book provides a contemporary analysis of shareholder power and considers the regulatory consequences of changing ownership patterns around the world. Leading international scholars in corporate law, governance and financial economics address these central issues from a range of different perspectives including historical, contemporary, legal, economic, political and comparative.