Power Play: Crown Governance in the Age of a Special Manager
Appointing a special director with powers to oversee the governance of Crown Resorts in Australia for the next two years presents unique challenges, writes former regulator David Green.
While Finkelstein’s Royal Commission recommended Crown Melbourne be given two years to restore her ability to hold a casino license, she clearly feared the repeat. To alleviate this concern, she opted for the appointment of a “special director” to serve as the ultimate decision maker for the company. The Victorian government has announced the appointment to the post of Stephen O’Bryan QC, former commissioner of the state’s Independent Anti-Corruption Commission (IBAC).
His instrument of appointment has not been made public, but the broad scope of the powers and responsibilities of the Special Director is detailed in a bill currently before Parliament that will significantly change Victoria’s casino and gambling laws. when it is promulgated. It is this bill that indicates some of the challenges that Crown Melbourne’s board of directors is likely to face in carrying out its duties while being under the effective control of Mr O’Bryan.
Notably, his powers will include:
There is no requirement contained in the bill that the person appointed to the role of special manager must be “fit” for the position. The bill provides that the special manager is not an associate of the operator of the casino; if he were a partner, he would be required to undergo a suitability assessment, including an assessment of his suitability for the post. While a former IBAC commissioner is undoubtedly ‘fit and appropriate’, a test of aptitude for such a supervisory role would arguably require more, such as relevant industry or regulatory experience, rather than an investigative experience. Likewise, there is no suitability threshold requirement for contractors that the special manager can hire to assist him. Presumably, their terms of engagement would exclude conflicts of interest and require undertakings of confidentiality, but without a probity assessment, it is impossible to measure the risk that an entrepreneur having access to confidential or commercially sensitive company records. could pose, regardless of affiliation or apparent reputation. .
It is not clear what “powers and privileges” the special manager will enjoy as a director of Crown Melbourne. He will have the right to attend Board and Committee meetings and review files anyway. He may also participate with voting rights in these meetings. What is potentially troubling, however, is the fact that he will not have any of the obligations, duties or responsibilities of a Crown Melbourne director. In particular, he will have no fiduciary duty to the company, to Crown Resorts, as a group holding company, or to the shareholders of the listed company. This asymmetry is perhaps unique in a creditworthy Australian business.
Fiduciary duty aside, it appears that the special manager is also unlikely to incur vicarious liability. Directors of Australian companies can be held personally liable for breaches of the law by the companies they govern, including in areas such as consumer protection, occupational health and safety, taxation, pensions and employment. Environmental Protection. The intention of the bill is either to exonerate the manager of any responsibility for anything that has been done under the law, or to attach this responsibility to the state if it arises from other legislation.
The power of the Special Director to give a binding direction to Crown Melbourne is limited to certain defined circumstances, although he has general power to give a direction substituting his judgment for that of the council if he considers that the direction is within the scope. “Best interests” of the company or its casino operations. This has the potential to put more emphasis on the asymmetry alluded to earlier.
The attention of the Special Director will be focused on the exercise of his functions, as detailed both in the legislation and in his deed of appointment. His interest in the commercial aspects of the business will likely be limited to matters that could threaten non-compliance with the law or regulatory requirements. He will certainly not be motivated by an imperative to maximize profits, compete more aggressively for business, or create shareholder value, other than removing the stain of Finkelstein’s finding of incapacity during his career. two-year term. One would expect that if he is wrong in judging what is in the best interests of the business, it will be on the conservative or low risk side.
How could this affect Crown Melbourne’s business? For example, and without being too fancy, this may require a complete overhaul of the company’s approach to the issue of minimizing gambling harm. Finkelstein found that his self-proclaimed “best approach in the world” to problem gambling was in contradiction with reality. A reset could potentially impact the company’s advertising and promotional activities, see a rollback of high limit slots and require a fundamental overhaul of its customer loyalty program. If the board cannot be convinced of the need for such changes, it might be appropriate for the manager to simply direct the board to implement appropriately revised policies on the grounds that the best interests of the company would be served in this way.
The substitution of the judgment of the special manager for that of the Council has another dimension, which the bill does not seem to address. Although the directors of the company are required to comply with any direction they receive from the manager, they are neither protected nor indemnified by law in the event that they are sued by a third party injured by the implementation of the directive. . The only workarounds are either the company’s own insurance policy for directors and officers, or membership of the state as a co-accused in any legal proceedings. A more satisfactory approach would be simply to provide the Commission with legal protection against the actions of third parties when implementing any directive it may receive.