Non-executive directors sitting on the boards of six heavy polluters named in a complaint to the competition watchdog may be feeling slightly less comfortable this week. They should be, because a groundswell of climate-change litigation is building around the world.
On June 11 the Australian Conservation Foundation complained to the Australian Competition and Consumer Commission, alleging Boral, Rio Tinto, Woodside, Bluescope Steel, Xstrata and Caltex had made “misleading and deceptive” statements about the impact of the Federal Government’s proposed emissions-trading regime.
The sometimes exaggerated public statements contrasted with far more measured and realistic financial disclosures to the companies’ shareholders. It appears the companies did protest too much – hoping either to block the proposed scheme (they’re almost there) or get a better deal out of it.
The ACCC is investigating the ACF complaint. The companies named have, by and large, denied any inconsistency and can readily argue it is impossible to calculate the financial impact of the legislation before it is passed.
But the action comes at a sensitive time for independent company directors, who are pondering their liability for inaccurate public statements by company executives after the successful prosecution of James Hardie. That case was brought under corporations law, rather than trade practices law, but there are parallels.
In an action brought by the Australian Securities and Investments Commission, Justice Ian Gzell found in April that James Hardie’s seven non-executive directors had breached their duty of care to the company by approving an inaccurate statement to the stock exchange in 2001, which said the company had “fully funded” its asbestos liabilities.
Ian Ramsay, a professor of commercial law at Melbourne University, says James Hardie’s attempt to transfer its asbestos liabilities once and for all to a dedicated foundation was a defining transaction, the culmination of years of effort.
The announcement was tabled at a meeting of the James Hardies board and if the directors didn’t see it or read it, they should have, the court found.
Ramsay says he can understand why the ACF chose the trade practices route. “If you compare James Hardie with what’s going on here, we’re some distance away,” he says. “Here, it’s not at all clear the extent to which the statements were a responsibility of the board,” says Ramsay. “Some of these are statements at conferences. Some are statements to inquiries.”
What is clear is that boards cannot let executives – the chief executive, the company secretary, the spokespeople – run around making inaccurate statements.
For companies that are more susceptible to climate change, Ramsay says, “one would expect boards to be taking more involvement in how a company deals with [the issue]“.
Full article: smh.com.au/business.
Transcripts: business.smh.com.au/business/you-are-at-risk
