02 November 2026
4 min read
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Personal relationships in the workplace are not, in themselves, a corporate governance issue. But when they intersect with reporting lines or decisions about remuneration, performance and employment, they can create conflicts that need to be identified and carefully managed.
ASIC’s recent civil penalty proceedings against former Super Retail Group CEO and Managing Director Anthony Heraghty have brought those issues into the spotlight.
In this case, ASIC alleges Mr Heraghty contravened section 180 of the Corporations Act by failing to exercise his powers and discharge his duties with the care and diligence that a reasonable person would exercise in the circumstances. ASIC also alleges Mr Heraghty breached section 1309(2) of the Corporations Act by giving, or making available, information relating to the company’s affairs that was misleading in a material particular because it omitted information concerning the alleged undisclosed relationship.
The proceedings raise a number of questions for boards about when a personal relationship becomes a conflict, what disclosure should look like and, more importantly, how the company should manage the situation once a conflict has been identified.
Australian law does not prohibit personal relationships in the workplace. The governance issue arises when a relationship creates an actual, potential or perceived conflict between someone’s personal interests and their responsibilities to the company.
Directors and senior executives are already subject to statutory, fiduciary and governance obligations that require them to put the company’s interests ahead of their own. A personal relationship becomes relevant to those obligations when it has the potential to influence, or appear to influence, corporate decision-making.
For example, a conflict may arise where one executive can influence decisions about another person’s remuneration, performance, promotion, employment or the handling of a complaint. This is where personal relationships can be more nuanced than traditional financial conflicts. The challenge is recognising that a conflict does not have to involve money to matter.
The key question is whether the relationship could affect, or reasonably be perceived to affect, a person’s objectivity or ability to exercise independent judgement. If it could, the board needs to consider how that conflict will be disclosed and managed, including whether the individual should step away from particular decisions or whether an independent decision-making process is required.
What happens after a conflict arises?
Once a conflict has been identified, it should be disclosed promptly and considered through an appropriate governance process. However, disclosure is only the starting point.
Disclosure makes a conflict visible, but it does not resolve it. Simply recording a conflict on a register will not address the underlying risk if the conflicted executive continues to participate in decisions where their independence could reasonably be questioned.
Importantly, the conflicted executive should not be left to decide for themselves how the conflict will be managed. The greater their seniority and influence, the more important it is that the conflict is assessed and managed independently.
Depending on the circumstances, this may involve:
There is no one-size-fits-all response. The measures put in place should be proportionate to the nature of the conflict, the executive’s level of influence and the decisions that may be affected. The aim is to ensure those decisions are demonstrably independent and can withstand scrutiny if challenged later.
What should boards and management teams consider?
ASIC’s proceedings are a timely reminder for boards and management teams to assess whether their existing governance policies and arrangements are sufficient to deal with conflicts arising from personal relationships in the workplace.
In practice, boards should consider:
Companies may already have conflict-of-interest, disclosure and remuneration policies that address these issues, but the greater risk can be in how those policies are applied in practice. A disclosed conflict that is not appropriately managed can present the same risk as a conflict that was never disclosed at all.
The broader lesson is not that organisations should seek to regulate private relationships. Rather, they should have governance arrangements capable of recognising when a personal relationship intersects with corporate decision-making and responding appropriately when it does.
If you have any questions about managing conflicts involving senior executives or need assistance with reviewing your organisation’s governance arrangements, please get in touch with us.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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