Law Of ASX Corporate Governance Essay


1.Did the Board of Ardent Leisure recognise and manage the risk arising from this incident?
2.Assuming the Board failed to manage the risk, did the company and the directors breach Principles 7 of the ASX principles of Good Corporate Governance? What is the consequence, if any, for the company failing to comply with Principle 7? Can the ASX take any disciplinary action against the directors and company for failing to recognise and manage the risk in this instance?

3.Could it be argued that the directors had breached their duty of care and diligence or is the significant financial harm suffered by the company sufficient penalty?
4.After the incident did the Board review and improve the effectiveness of the company’s risk management framework?


1. It is required by a company listed in the ASX to establish a suitable framework that solely concentrates over the degrees of management of risk in the bounds within the entity, such laws are clearly stated in the ‘Principle 7 of the Corporate Governance.’ It is required by the laws of the ASX that the said entity’s directorial board has to, by all the power bestowed upon it, act to the culmination of various processes and steps that would be taken into action when and only when a risk factor is discovered, in order to solve possible issues[1]. The failure to provide accurate judgment and recognition to the factors of risk may not only lead to the downfall in the goodwill of a company in the society, but will in all cases lead to the withdrawal of investors and potential investments, workers, consumers and every other factor.

When the above discussion is taken in relation with the company in the question, that is Ardent Leisure, it is seen that in the Dreamworld incident, the entity had not only refrained to take proper actions immediately, but it is clearly seen that the directorial board had made no necessary measures in the incorporation of a suitable risk management framework. It can be rightfully said that the company in question made no attempt in recognition of risk and tried to resolve it in any way.

It is bound by the stringent laws of the ASX that every company has to create a separate committee that would only concentrate its said powers that are bestowed upon it by the directorial committee in incorporation of the will of the Principle 7 and ASX and examining risk factors and creation of precautionary measures. It is willed by the law that such a committee will have three separate directors controlling it. The review and incorporation of such laws are strictly obeyed by the directors.

In context to what was discussed in the previous paragraph, it can be clearly said that the company, Ardent Leisure, had had no proper framework for the said management of risk and hence, was unable to take even the slightest action when and after the accident occurred. Not only did the said entity fail to recognizing the factors of risk, but couldn’t take a proper step in order to mitigate the damage. Its actions can be clearly blamed upon the directorial board of the company and deserved the backlash that it so strongly received.

It is necessary by law for company to maintain a good corporate governance, unlike the company in question, Ardent Leisure. Stringent laws are to be incorporated such that the various functions and relationships with its bounds can be taken care of. It helps in keeping accountability of the workers and the ones controlling the processes in the said corporation[2]. Investors are attracted to a company with a strong Corporate Governance scheme.

As judged by what was stated in the previous discussions, it can be said that the company, lacking a proper risk management framework, caused the accident and failed to incorporate any measures in order to mitigate it. It is a law of ASX that the owner/occupier of a property is responsible for any kind of damage done to any human life, whether injury or death that is caused inside his premises and has to take measures in order to mitigate them. But, In the case of Ardent Leisure, the company failed to introduce any such measures as there was no framework to support it[3]. Hence, the avoidable accident turned to a disaster.

Previously, it was seen that by the rules incorporated by the ASX, all the companies are bound to create a separate committee that functions with sole purpose of find risk factors and incorporation of the necessary steps that would lead to the desired solution required by the company in order to deal with the risk factors. It was also stated that such a committee is empowered to review and review company information and work accordingly[4].

It is further stated by the ASX, that in accordance to the policies of Australian Security Exchange, the rule of ‘if not, why not’ was established. It allowed the companies to refuse to follow the laws of ASX, but, in that case, the entity has to provide a valid reason and explanation. If not, then the company will be penalized with an amount of $250000 for not following the rules of operation. A breaching of these regulations cost to a penalty of $1000000. An example can be seen in the case of Sino Australia Oil and Gas limited (Company), which too was penalized by ASX[5].

Judging by what was discussed in the last two paragraphs, it can be said that Ardent Leisure Pvt. Ltd, failed to follow the Principle 7 of Corporate Governance. The company didn’t just ignore the factors of risk; it didn’t create a framework that would search for the search for the factors and work for its most possible mitigation. The case of Dreamworld was most avoidable one of all but since the company was careless enough, not advancing to the worst case scenario instantaneously, led to the disaster. If the socio-environmental risks were disclosed properly, then the incident might have been avoided. So, it can be rightfully said that the incident occurred solely due to the company’s failure in following the said principles[6].

The above series of events that caused due to the incompetence of the Ardent Leisure in order to follow the Principle 7 didn’t just leave it financially vulnerable, but also destroyed its social standing and market power when it came to competition and profits. The company suffered a financial depression that also included the huge amount of penalty inflicted upon it by the ASX. Hence, the entity had willing exposed itself to the risk that had might never have happened to the company in the first place. The Dreamworld incident left a scar upon the face of Ardent Leisure and decreased its Goodwill value and Net Worth[7].

3. It is prudent by the Laws of ASX, that the Directorial board of the will take decisions that are for the sole purpose of the benefit of it and nothing else. It is said that if a director is a person of sound intelligence and rational mentality, he can never make decisions that are wrong, if he wills it[8]. It can be said that the directorial decisions are absolute and are subjected to the common laws of the ASX.

The above statutory obligation can be seen in the Section 180 of the Corporations Act 2001 (Cth), that very frankly states the obligations of the directorial board to act with care and earnest toward the sole purpose of developing the organization[9]. Directors who are deemed incapable of organizing themselves according to rules or are held responsible for a possible breach can be held into custody by the section 1317 of the Act as a result of the civil penalties. It is further stated that the director can in no way bring personal interest ahead of the interests of the company and act selfishly.

In the case given to us, it can be clearly stated that Ardent Leisure has clearly failed to work accordance to the Section 180 of the Corporations Act 2001 (Cth) of the laws of the ASX and clearly avoided even the creation of the said framework[10]. In order to prove that the incident was directly related to stipulated mistakes of the directors, it can be said that it is essential to prove the fact that the directors committed a breach while being of sound mind and reason that might clearly have not been the case of any other prudent person.

Since, the prudency of the directors can confirmed, it can be said that the directors of Ardent Leisure are responsible for the breach of the common law and also the section 180 as it can be clearly stated that any sane person would have taken precautionary measures as advised by the ASX. So, the directors are bound to penalized as per stated on the previous sections due to their failures in dealing with the Dreamworld incident.

It was seen that the company, Ardent Leisure Pvt. Ltd took no actions to reach out to the families of the people who lost their lives after what had happened in the Dreamworld incident. It is the first person right of a company to contact the families of the dead or injured when the accident has happened inside the boundaries of its premises. Then again, Ardent chose to completely ignore that in the first place. After much media back lashing, the company took it upon themselves to take necessary precautions. The Dreamworld park remained closed for 45 days and the the situations was thoroughly examined in order to single out the cause and deal with it. Then again, the said situation may not have happened if proper measures were made before hand.

Ardent Leisure had proclaimed itself to be an entertainment company and took it upon them to spread the entertainment market across the United States. It cannot be denied that Ardent Leisure was a leading producer in the global economical entertainment market until the Dreamworld incident took made the company take a turn for the worst. The constant criticism and backlashes led to the CEO of the company, Deborah Thomas to take her resignation from her overshadowed by the guilt that was burdened on to her for not taking effective actions[11]. The company faced a considerable decline in its stock post the accident and now, it has turned their attention to involving themselves into the reduction of damage and risk control. The investigation as a prime objective had commenced since the accident took place.

The ride that led to the fateful event, ‘Thunder River Rapid’ was permanently shut down and the company has taken it upon themselves to re-establish their industry and to take precautionary measures with the help of the authorities and few other private sources[12]. A so called ‘risk management committee’ was formed after the disaster and was given the sole objective of looking into the matter of mitigation and risk management. It was made sure that all the potential risks are identified and dealt with in all caution. Even after such an elaborate incident, the company denies its total fault and says that it still retains the position of a top entertainment company in the industry with the help of government policies.


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