The hidden villains of the market collapse, faceless company directors, are revolting. The Financial Review reported today that a recent “survey” found that 27% of Top 200 company directors believed that there was a high risk of being found personally liable for decisions. A further 65% of directors claimed that the risk of liability makes them occasionally take an overly cautious approach to business decisions.

The survey was taken as part of the push by the company director trade union (otherwise known as the Australian Institute of Company Directors) to further weaken Australia’s current appallingly lax directors’ duties. The Financial Review readily agreed, noting in its editorial that “the broad call is for a wider safety net, a defense shield from litigation if they act reasonable and in good faith… when it comes to liabilities, the Rudd government needs to be wary of calls to boost criminal penalties for poor decision making.”

Upon reading the AICD and AFR’s claims, one could be forgiven for thinking that former company directors all over Australia are languishing in squalid prison cells after making poor investment decisions on behalf of shareholders. Of course, nothing could be further from the truth. As Crikey reported last year, when pressed, the company directors’ union was only able to come up with two examples of directors being held “unfairly accountable” for their actions. One of those instances involved a CEO who was held liable for an explosion which killed a worker (the CEO in question was fined $22,500). The other instance involved a trucking company director who pressured drivers to work excessive hours and failed to maintain adequate safety processes, leading to the death of a worker. That director was fined the grand sum of $42,000. Hardly a conga line of corporate responsibility.

Given the equity debacle presided over by directors this year, and the extraordinary remuneration paid by inept executives, company directors should be grateful that no real action has been taken against them. In fact, it would be difficult to think of a group of people who are less accountable, and in a relative sense, as highly paid, as company directors.

Consider that no non-executive director of ABC Learning Centres, which has slid into administration after producing years of fictitious financial statements, has been subject to any legal action (an ASIC investigation is being conducted into ABC executives regarding possible disclosure breaches). Moreover, the chairman of ABC’s audit committee, David Ryan, was re-elected to the boards of Transurban and Lend Lease in recent months, despite happily signing off in financial statements which told ABC shareholders that the company was making growing profits, when in actual fact, the business was losing millions.

Former Allco director, Barbara Ward, who signed off on the company’s destructive acquisition of Rubicon (which directly benefited Ward’s fellow Allco directors), was recently appointed to the Qantas board. Similarly, Rod Eddington, another of the ‘Allco Three’, has been anointed Chairman-elect of ANZ Bank. It was reported today that $10 million in statutory entitlements for holiday leave and long service leave for Allco staff has been lost. The Rubicon deal, approved by Ward and Eddington, funneled almost $60 million in cash into the hands of executives David Coe and Gordon Fell. Forget accountability — these directors destroyed a company, cost employees millions of dollars in legal entitlements, and will now earn hundreds of thousands of dollars doing the same for another group of shareholders.

Similarly, no action has been taken against the directors of disgraced funds manager MFS/Octaviar. Investors in the company have lost billions as executives Michael King and Phil Adams wandered the world, overpaying for assets and fooling shareholders with blatantly incorrect financial statements. In addition, investors (many of whom are retirees) in MFS’s managed funds, such as the MFS Premium Income Fund, have had distributions suspended or postponed. Two former MFS directors, Paul Manka and Michael Hiscock, were financial planners whose firm, Avenue Capital Management, recommended that their clients invest their savings in MFS Premium Investment Fund. No action has been taken against Manka or Hiscock.

Instead of further weakening director liability, Federal Corporate Law Minister Nick Sherry should be adding further investor protections, seeking to hold directors personally accountable where companies produce flawed financial statements or where directors approve destructive related-party acquisitions.