From Stepping-Stones to Throwing Stones: Officers’ Liability for Corporate Compliance Failures after Cassimatis

Abstract

Australian corporate law allows for significant civil penalties to be imposed by a court on negligent corporate officers, including directors. For more than a decade, Australian Securities and Investments Commission used civil prosecutions for negligence exclusively in situations where an officer is alleged to have exposed their corporation to foreseeable risk of harm that would flow from a contravention by the corporation of a regulatory or disclosure obligation. This enforcement strategy—known as ‘stepping-stones’—has been strongly criticised, including by Rares J in his 2020 dissenting opinion in the Cassimatis appeal. This article explains how stepping-stones works as an enforcement strategy in the context of corporate compliance failures, explores the various criticisms of it, and argues for reform. It proposes a legislative alternative that rebalances individual officer liability, to reflect contemporary governance practices and encourage better management and oversight of non-financial risk in corporations.