The short answer

The chair of a board does not owe a separate, freestanding category of directors’ duties merely because they are chair.

However, Australian law recognises that the chair may carry additional responsibilities, and that those responsibilities may affect how the duty of care and diligence is applied. The chair remains one director among peers, but not every director necessarily occupies the same practical position within the governance architecture of the company.

That distinction matters.

The legal starting point

Section 180(1) of the Corporations Act 2001 (Cth) requires a director or officer to exercise care and diligence to the degree that a reasonable person would exercise if they were a director or officer of a corporation in the corporation’s circumstances and occupied the same office with the same responsibilities.

The critical words are “office” and “responsibilities”.

Those responsibilities are not confined to formal statutory responsibilities. The High Court in Shafron v ASIC recognised that responsibilities may include whatever responsibilities the officer has within the corporation, regardless of how or why those responsibilities came to be imposed. Beach J adopted that approach in ASIC v Mitchell (No 2).

The chair is not a “directorial overlord”

It would be wrong to suggest that the chair has general authority superior to the board.

In ASIC v Mitchell (No 2), Beach J made clear that the chair has no power or authority to manage the corporation merely by reason of being chair. Apart from procedural control of meetings and any casting vote, the chair has no greater authority than an ordinary director.

That is an important corrective. The board acts as a collective decision-making body. The chair does not replace the board.

But the role is not merely ceremonial

The same judgment makes equally clear that the chair’s role is not merely ceremonial.

Beach J referred to statutory replaceable rules concerning chairing meetings, casting votes and signing minutes, and observed that those features promote the chair’s role beyond the ceremonial.

He also cited the ASX Corporate Governance Principles, which describe the chair as responsible for leading the board, facilitating the effective contribution of directors, promoting constructive relations between directors and management, setting the board agenda and ensuring adequate time for discussion.

Earlier authorities point in the same direction. In AWA Ltd v Daniels, Rogers J stated that the chair is responsible to a greater extent than any other director for the performance of the board as a whole, including selecting matters and documents to be brought to the board’s attention. Beach J noted that the NSW Court of Appeal did not disturb those observations in Daniels v Anderson.

In Woolworths Ltd v Kelly, Mahoney JA observed that a chair has additional rights, duties and opportunities, including significant influence over the agenda, which may affect the content of fiduciary duties owed to the company.

What did ASIC v Rich add?

ASIC v Rich is important because Austin J accepted, at least at the strike-out stage, that a chair of a listed company may have responsibilities going beyond procedural duties. In the later Rich judgment, Austin J explained that “responsibilities” under s 180 direct attention to the factual arrangements operating within the company, including skills, experience, expectations and the actual distribution of work. Beach J expressly agreed with that analysis in Mitchell.

That is the key legal point: the chair’s additional exposure arises not because the chair has a different duty, but because the chair may have different responsibilities.

Information flow is central

The most practical area of potential chair exposure is information flow.

In Mitchell, ASIC alleged that the chair should have ensured certain documents and information were provided to the Tennis Australia board. ASIC ultimately failed against the chair, Mr Healy, because the Court found that, in the circumstances, he was entitled to rely on management’s judgment about what information should be placed before the board.

But the case is still significant. Beach J accepted that a chair has responsibility to ensure that the board has sufficient information, in written or oral form, to meaningfully consider, discuss and decide matters before it.

That is a powerful governance lesson.

Board chair versus committee chair

The authorities are strongest in relation to board chairs. The board chair has whole-of-board responsibilities: agenda-setting, information flow, meeting conduct, board dynamics and external representation.

Committee chairs are different. Their responsibilities are usually confined to the committee’s remit and charter. However, the same legal principle applies: where a committee chair has assumed responsibility for a particular area — audit, risk, remuneration, nominations, compliance or technology — their conduct may be judged against those responsibilities.

APRA guidance reinforces that committees may assist with oversight, but the board retains ultimate responsibility for ensuring duties are performed.

Practical implications for chairs

A prudent chair should ensure that:

• the chair’s role is clearly described in the board charter and appointment documentation;
• agenda-setting is transparent and not used to suppress material issues;
• directors receive sufficient information to make informed decisions;
• adequate time is allowed for material matters;
• dissenting views and unresolved concerns are handled properly;
• board minutes accurately record key decisions, reasons and material issues considered; and
• the chair does not blur the line between board leadership and executive management.

Conclusion

The better view is not that chairs owe a wholly separate class of legal duties.

The better view is this:

The chair owes the same core duties as other directors, but those duties may be applied by reference to the chair’s additional responsibilities, influence and practical control over board process.

In that sense, the chair’s role carries more than prestige, workload and additional remuneration. It may also carry a higher governance burden and, in the right circumstances, greater legal exposure.

With many years of experience, Governance in Action Pty Ltd is well placed to assist boards and company secretaries (and other governance professionals) in managing the issues raised in this article.

IMPORTANT: This article / blog has been prepared with the aid of AI (including refining structure, wording and readability).Final judgement, editing and accountability remain with the author.