BSB111 Business Law & Ethics Lecture
Week 2 - Corporate Social Responsibility and
• A company is an artificial entity recognised by the law as a legal person
with its own rights and liabilities
• The terms company & corporation are often used interchangeably
• In AUS, a company comes into existence when it has been registered by
the Australian Securities and Investments Commission (ASIC).
A company has 2 characteristics:
• Separate legal entity
• Limited liability
Separate legal entity
• A company by law is considered to be a separate legal entity.
• This means that it is legally a different ‘person’ to the shareholders, the
people who control the company (directors) and the employees.
• Considered to have the legal powers of a person - so it can own property,
has its own obligations, can enter into contracts, has the right to issue
shares to raise funds and the right to sue other parties.
• This means that the shareholders of the company are liable only to the
extent of any amounts unpaid on their shares in the winding up of the
company. Any creditors who are still owed money cannot claim from the
shareholders’ personal assets.
• This is not the same for a stole trader or partnership – they have
The interest in corporate governance
Corporate governance has come under increased scrutiny as a result of high
profile corporate misconduct and concerns over the management of
• Directors of a company using company resources to benefit themselves
often involves fraud;
• False reporting or hiding information to shareholders to avoid
• Lack of disclosure
What is corporate governance? • The system by which business corporations are directed and controlled
• These are the "procedures and processes according to which an
organisation is directed and controlled. The corporate governance
structure specifies the distribution of rights and responsibilities among
the different participants in the organisation and lays down the rules and
procedures for decision making".
• A good corporate governance system ensures that the corporation sets
appropriate objectives and puts systems and structures in place to
ensure that these objectives are met and also provides the means for
others to control and monitor the activities of the corporations and its
• Good governance principle - without this, companies have high
turnovers for employment, and lose money having to hire and train new
Elements of corporate governance
There is no single model of corporate governance, models include
• OECD's Principles of Corporate Governance
• ASX Principles of Corporate Governance
• Focus of BSB111:
1. Controlling and directing the directors