Deborah Smithers, National Head of KPMG's Board and Corporate Governance Advisory Services, said that being a non-executive director is complex and risky.
"Many non-executive directors are unaware that they have legal responsibilities and that recent corporate collapses have created an environment where the performances of companies and directors are being placed under intense scrutiny.
"Regulators, government, shareholders and the media are also questioning the adequacy of corporate governance processes.
"The Australian Securities and Investment Commission (ASIC) is taking a greater interest in continuous disclosure and pressing for higher financial penalties for corporate transgression while the collapse of Enron has placed all directors under a greater spotlight."
Meanwhile, Queensland has made its corporations law more stringent and Victoria has introduced a bill that makes directors criminally liable for negligent behaviour.
Many problems arise when parent companies appoint their executives to the boards of joint ventures with the aim of protecting their own interests.
Very quickly non-executive directors find that they are confronted with situations that create a potential conflict of interest. Decisions that benefit the joint venture may adversely affect the parent and vice versa.
The temptation is to make decisions that please their principal employer.
Conflicts of interests can also arise when a director supplies services to the company, has related-party loans, guarantees and other securities, receives remuneration unrelated to performance, enjoys personal relationships with other members of the organisation or competes with the company for tenders.
"People need to realise that by taking on the role of the director, they must commit themselves to the highest standards of ethical and lawful conduct.
"Before they attend their first board meeting, few company directors undergo any formal initiation, training or even preparation for a task that can involve extremely complex business, legal and ethical issues while carrying a great deal of risk.
"Good corporate governance is fundamentally about helping firms to be responsive to changing economic and societal demands.
"The critical issues of sustainability, deregulation and competition, e-commerce, strategic alliances and the increased focus on customer performance standards are changing the landscape for the mining, oil, gas, forestry and power generation sectors."
KPMG's Corporate Governance practice has developed a series of Directors' Insight workshops that encourage a process for training directors on the roles and responsibilities of board members and management.
