Engagement, Oversight and Accountability for Directors in High-Risk Businesses

Directors play a critical role in the governance of corporations. Particularly in complex or high-risk industries, effective board oversight depends on directors who are prepared to question, probe and challenge management where necessary. Recently, in Australian Securities and Investments Commission v Bekier [2026] FCA 196 the Federal Court of Australia considered whether the directors of The Star Entertainment Group had breached their duty of care and diligence in one of the most significant enforcement actions brought by the Australian Securities and Investments Commission (ASIC).

Although ASIC ultimately did not succeed in its claims against the non-executive directors, the decision provides valuable insight into the factors the court considers when assessing whether directors have discharged their duties.

Background

In this matter, ASIC alleged that the non-executive directors breached their duty of care and diligence under s180(1) of the Corporations Act 2001 by failing to adequately monitor management and respond to foreseeable risks associated with operating a large casino business.

ASIC argued that the directors should have taken stronger steps to address governance and regulatory risks, including issues relating to junket operators and broader cultural and compliance failures within the company.

The Court accepted that casinos operate in a uniquely high-risk environment and require vigilant governance, but ultimately found that ASIC had not proven the specific breaches it alleged against the non-executive directors.

Why ASIC’s Case Failed

ASIC’s case failed largely because it could not establish that the pleaded risks were sufficiently foreseeable at the relevant time or that reasonable directors would have taken the precise steps ASIC claimed were required. The Court emphasised that s180(1) does not impose a standard of perfection and that directors’ conduct must be assessed based on the information available at the time rather than with the benefit of hindsight.

The evidence was also limited as most directors did not give evidence, and many discussions were not documented in board minutes, leaving the Court primarily reliant on contemporaneous documents such as emails and meeting records. As a result, while the evidence raised concerns about governance practices, it was insufficient to establish the pleaded contraventions.

Court’s Observations on the Board

Despite dismissing the claims against the non-executive directors, the Court expressed significant concern about the functioning of the board and the culture within Star. The documentary record suggested that directors did not consistently press management with difficult questions or subject key issues to sustained scrutiny.

The Court observed that the company’s culture was dysfunctional and unethical, with serious problems only coming to light through investigative journalism and subsequent regulatory inquiry. However, the Court stressed that the proceeding was not a general review of corporate governance but a determination of whether ASIC had proved the specific statutory breaches it alleged.

What Directors Should Have Done 

Directors should have actively guided and monitored management, taken a diligent and intelligent interest in the information presented to them, and approached their responsibilities with an enquiring and critical mindset.

Justice Lee identified several key expectations of directors in carrying out their duties highlighting what the directors ought to have done in this matter:

1. All directors, whether executive or non-executive, must take reasonable steps to ensure they are properly informed and able to effectively guide and supervise the management of the company.
2. Directors have a continuing obligation to stay informed about the company’s activities and operations.
3. Being appointed for a particular area of expertise does not limit a director’s responsibilities; directors must remain attentive to the company’s affairs more broadly, not just matters within their specialty.
4. Where information comes to a director’s attention that raises, or should reasonably raise, suspicion that something may be wrong, the director is required to make further inquiries and investigate the issue.

Particularly in high-risk industries, directors are expected to interrogate information, identify potential risks, and challenge management where necessary. While technological tools such as artificial intelligence may assist directors in navigating large volumes of board materials, the Court emphasised that the statutory duty under s180(1) remains personal and requires informed human judgment.