Corporate Governance and the "two strikes rule"

17 February 2014

Professor Jennifer Hill
Professor Jennifer Hill

Professor Jennifer Hill says problems at giant retailer David Jones show how institutional investors are now prepared to use a "two strikes rule" to enforce corporate governance standards generally.

Shareholders successfully called for three board members to resign, including the Chairman, for breaching its share-trading policy, which prohibits directors and officers from trading shares when they are in possession of unpublished price-sensitive information.

"Australian shareholders have stronger rights and more leverage in this respect than, for example, US shareholders, and the David Jones shareholders already used their power to register a first strike against the company in late 2013," Professor Hill asserts in an article published in the Australian Financial Review.

"A number of jurisdictions, including Australia, have granted shareholders stronger rights in the aftermath of the global financial crisis, and it has been said that one of the rationales and justifications for this has been to promote 'market trust'."

Contact: Greg Sherington

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