By Rachel Waterhouse, CEO, Australian Shareholders’ Association
Star ruling: the retail shareholder view
The Federal Court’s liability judgment found that Star’s former non-executive directors did not breach their duties, while finding contraventions at senior executive level. For retail shareholders, however, that does not settle the issue.
In the views shared with Australian Shareholders’ Association (ASA) after the ruling, one message came through clearly: legal liability is not the only test investors apply when judging board performance.
Many retail shareholders will still see Star as a governance failure.
That conclusion is made sharper by the fact that Star was ranked the global leader in the Casinos and Gaming industry in the Dow Jones Sustainability Index from 2016 to 2021, with governance and business ethics part of the assessment. For retail shareholders, that only reinforces the point that external recognition is no substitute for strong governance in practice.
The judgment has brought a deeper investor question into focus. Even where legal liability is not established against non-executive directors, what should shareholders conclude when a board has presided over such a serious breakdown in governance, risk oversight and culture? For investors who watched value destroyed, that goes to the heart of board accountability.
Joe Longo, ASIC Chair, recently said there can be a gap between what the community expects and what the corporations law requires. Many retail investors will see the Star decision through that same lens. The Court has ruled on legal liability. Shareholders are asking a different question: did the board show the judgment, scepticism, and challenge that investors are entitled to expect from those overseeing their capital?
The ASA members who shared their views on the ruling were consistent on one central point: shareholders expect directors to do more than attend meetings, receive board papers and accept management assurances. They expect directors to challenge, probe and test what they are being told, particularly when risk, compliance, culture, and regulatory standing are at stake.
That expectation is reinforced by the judgment itself. Justice Lee made clear that directors cannot be passive recipients of information. Directors are not there simply to receive reports and note assurances. They are there to guide, monitor, question and challenge, especially when warning signs are emerging.
ASA members made the point that when management withholds information or fails to escalate risk, the board’s job becomes more important, not less. Shareholders do not expect directors to know every operational detail. They do expect them to recognise warning signs, escalate concerns and seek independent verification when something does not stack up.
Several members also noted that boards cannot simply rely on internal reporting if external risk reviews, regulatory scrutiny and media revelations are already pointing to deeper problems. A board cannot be passive in the face of those signals. It must ask harder questions, insist on better answers, and ensure that risk and compliance functions have real standing and direct access. It must also look beyond formal reporting to culture, including whether incentives, behaviours and reporting lines are producing the right outcomes.
There needs to be accountability when oversight fails. Investors rely on boards to identify problems early, before they become crises. They expect directors to have the time, expertise, experience and willingness to provide independent oversight and to ensure governance processes are strong enough to surface problems early.
Retail investors are often told to focus on valuation, strategy and earnings. But the member views shared with ASA also show that trust in the people running a company is a fundamental investment issue. If investors lose confidence in the judgment and integrity of the board and management team, that should affect how they think about value. Governance is not a side issue. It goes to the quality and durability of the investment itself.
Governance matters across all sectors. But in higher-risk and highly regulated sectors such as gambling, the consequences of governance failure can be faster, more severe and more visible. In these sectors, governance does not simply affect reputation. It goes directly to the right to operate.
Some ASA members rightly argue that the same governance standards should apply across all listed companies, and they do. Any company can become high risk if the culture, controls and leadership are weak enough. What Star shows is not that governance matters more in gambling than elsewhere, but that when regulation is central to a business model, governance failures can destroy value faster and more decisively.
It is also important to distinguish the former board and management team from the current leadership. Investors should judge today’s Star on the quality of its remediation, its transparency and whether governance has improved. But trust should not be restored on assertion alone. Investors should expect evidence.
This was not just a legal judgment. It was a reminder of what retail shareholders expect from boards: challenge, scepticism, early escalation of risk and genuine accountability when oversight fails. The former non-executive directors were not found legally liable, but many retail shareholders will still see the episode as a major governance failure. That is the lesson ASA members are drawing from the Star ruling. When they assess other companies after this decision, they will ask one question: can this board be trusted to challenge management, recognise risk early and protect shareholder capital?
