Melbourne Law School - Theses
Permanent URI for this collection
Search Results
1 - 1 of 1
-
ItemThe duty to act in the best interests of the public entity( 2014)In common with directors of companies, directors of public entities in Victoria and other Australian jurisdictions are now subject to various duties. In Victoria, these duties are applied by the Public Administration Act 2004 (Vic). This thesis examines one of those duties - the duty of directors of public entities to act in the best interests of the entity on whose board they sit. This duty has been taken directly from company law and applied to the public sector, notwithstanding that private companies have different functions. Courts have found in the private sector context that this duty requires directors to act in the best interests of a company’s shareholders. Public sector bodies have a range of broader objectives that make the duty's application in the public sector questionable, in particular the absence of any readily identifiable ‘shareholder’. The central question of this thesis asks how should the duty be supported theoretically and interpreted in the public sector context. There are two main potential rationales that the duty might serve. The duty could serve predominantly as a mechanism for controlling director behaviour, reflecting the private sector case law on the duty, or could be predominantly an accountability mechanism, drawing on its status as a fiduciary duty, thereby taking a broader stakeholder view of its functions. The thesis discusses the interplay between control and accountability in this context. The thesis examines the history and policy rationale for imposing the duty in the public sector and finds that Australian governments have not identified what the purpose of the duty in the public sector is. The examination reveals that the history, case law and statutory provisions provide little insight into how the duty might operate in the public sector context. The thesis then argues that, from a theoretical perspective, the duty as a control mechanism in the public sector is merely one of a number of other controls that government imposes upon public entity boards. Its effectiveness as a stand alone control mechanism is therefore questionable. It is argued that the accountability analysis is preferable. The notion that a director occupies a position of trust is consistent with the fiduciary nature of the duty and also gives the duty a clearer accountability role. The discussion identifies competing theories of the purpose of fiduciary duties and concludes that a stakeholder oriented view of the duty predominantly as an accountability mechanism in the public sector is preferable. Support for a stakeholder view of the duty is provided by empirical research consisting of a survey of current directors of public entities in Victoria along with more detailed follow up interviews with selected directors. The empirical research produced some support for a stakeholder view and also raised issues around public entity governance. Finally, the thesis considers the practical application of a stakeholder based interpretation of the duty in the public sector with a focus on issues of standing to sue for an action for breach, the availability of judicial review and what practical effects might result, including how directors might be more accountable. The thesis considers the difficulty that directors might have in identifying stakeholders and balancing their competing interests, and the difficulties for stakeholders in framing arguments about what substantive breach of the duty might entail. Notwithstanding these difficulties, the threat of litigation under a stakeholder interpretation of the duty is argued to be a means of making directors of public entities more accountable.