Directors’ duties: Acting in the best interests of the company

Overview

Directors have a duty to act in good faith and in what they believe to be the best interests of the company, as set out in section 131(1) of the Companies Act 1993. 

The Companies (Directors Duties) Amendment Bill, a member’s bill fronted by Labour MP Dr Duncan Webb, seeks to clarify that directors can take into account environmental, social and governance factors in determining the best interests of the company.

The Bill proposes an additional subsection to section 131 of the Companies Act, which would state:

“To avoid doubt, a director of a company may, when determining the best interests of the company, take into account recognised environmental, social and governance factors, such as:

• recognising the principles of the Treaty of Waitangi (Te Tiriti o Waitangi)
• reducing adverse environmental impacts
• upholding high standards of ethical behaviour
• following fair and equitable employment practices
• recognising the interests of the wider community.”

The Explanatory Note to the Bill notes “This Bill makes clear that a director, in acting as the mind and will of the company, can take actions which take into account wider matters other than the financial bottom-line. This accords with modern corporate governance theory that recognises that corporations are connected with communities, wider society, and the environment and need to measure their performance not only in financial terms, but also against wider measures including social, and environmental matters.” 

Dr Webb joins us to discuss the proposed amendments and to hear your thoughts on this matter. 

First Steps in Governance and Emerging Director Award presentations
We will also be recognising this year’s First Steps in Governance Award and Emerging Director Award recipients and are delighted to be presenting Morgan Walker, Nicole Robinson, Alison van Polanen, Anna Wilson, Alli Copland and Ash-leigh Campbell with their awards this evening.

The recent IoD and MinterEllisonRuddWatts whitepaper Stakeholder governance: A call to review directors’ duties also addresses the evolving corporate governance landscape in relation to stakeholders and called on the Government to review the framework for directors’ duties in the Companies Act 1993.

Dr Duncan Webb MP

Dr Webb is a former partner at Lane Neave where he specialised in civil litigation, especially homeowner insurance claims following the Canterbury earthquakes.  He is the author of several law texts, was New Zealand’s first Legal Complaints Review Officer and is acknowledged as one of New Zealand’s leading experts on legal ethics.   

Dr Webb is currently the Labour MP for Christchurch Central, elected in 2017.  He chairs the Environment Select Committee and has a particular interest in issues around access to justice, social justice and human rights.

Additional information

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Contact

Sharynn Johnson
Canterbury Branch Manager

+64 3 968 6468
canterbury.branch@iod.org.nz

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