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Week 5: Accountability of Boards and CEO's in Regards to Employees Wrongdoings

The role of the board of directors and CEO’s is to ensure the appropriate running and management of a corporation, while also protecting the interests of the shareholders. The Corporations Act 2001 s.769B determines that a director may be held personally liable for the conduct of employees. 

Even if the directors are unaware of any breaches, it is their role/duty to ensure that all members are compliant with the relevant laws and regulations. Similar to a parent-child relationship, for instance; a parent may not know their child was shoplifting, but will still have to face consequences of paying the fines, and having their parenting under fire. Hence, if the board and CEO are not fulfilling their duties appropriately, they are to be prosecuted as well, unless they can establish that they exercised due diligence.

The Royal Commission into the banking and financial services sector found several crimes had been committed including; alleged bribery, forged documentation, charging the deceased, lying to regulators etc. With several of these crimes being committed by subordinates. However, the final report submitted by Commissioner Hayne noted: 

"There can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and their boards and senior management"(Hayne, 2019). 

Yet, many still question/argue that they should not be held responsible simply because they did not commit the crimes. However, the concept of vicarious liability states that an employer can be liable for the acts committed by an employee, regardless if there was any “permission” granted to the employee. This refers to one of strict liability, which means that liability can occur without proof of fault.

Additional Information:



References 

Hayne, K. M. (2019). Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Canberra: Commonwealth of Australia.

Canstar. (2018, June 18). Banking Royal Commission 101 [Video]. Youtube.

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