Corporate Law Reform in Australia: An Analysis of the Influence of Ownership Structures and Corporate Failure

Abstract

Recent studies that have measured the levels of shareholder protection in Australia and compared them internationally have highlighted the relative strength of Australian shareholder protection. However, the question as to why this is so remains unanswered. Theories suggest that the development of corporate law is influenced by corporate ownership structures. Several scholars argue that this can occur when corporate ownership structures provide the means for interest groups to exercise political power and thereby influence law reform or when inefficiencies arising from corporate ownership structures result in changes to corporate law. This study seeks to determine whether there is any evidence of corporate ownership structures contributing to the development of Australian corporate law. The factors that have led to changes in Australian corporate law over time are examined, first by drawing from the leximetric data that measures changes in the strength of shareholder protection in Australia from 1970 to 2010, and secondly by examining three significant reforms occurring over a period of two decades. These reforms are the strengthening of the regulation of related party transactions in 1992 (the reforms prohibited the giving of financial benefits to directors of public companies and their immediate families unless the transaction was exempt or approved by disinterested shareholders), the auditor independence reforms in 2004 and the introduction of the "two strikes" rules relating to remuneration in 2011. The results of this study provide little support for the proposition that corporate ownership structures have influenced the development of Australian corporate law. Several possible alternative explanations for the shape corporate law in Australia are suggested.

Keywords: corporate law reform, corporate ownership, shareholder protection