Abstract
Corporations spend significant amounts of money on art collecting and art sponsorship, but little research has been done on the question of whether such activities are permissible in light of directors’ duties. This article addresses that issue by examining whether corporate expenditure on art collecting and sponsorship is consistent with the duty to act in the bests interests of a corporation, the duty to exercise powers for a proper purpose and the fiduciary duty not to make improper use corporate information or position. This is done first by examining the scale of corporate expenditure on art and then by analysing the case law on various directors’ duties, before discussing whether corporate art collecting is legitimate in light of those duties. The article examines the most important reasons why a corporation may collect art – as an investment, in furtherance of corporate social responsibility goals and in order to enhance the psychological well-being of employees – and concludes that while art collecting for such purposes does not amount to a breach of directors’ duties, this is subject to the requirement that a corporation put into place safeguards contained in a formalised art collecting and sponsorship policy, the key principles of which are stated at the end of the article.
Highlights
This article examines the relationship between two areas which may on the face of it appear to be unrelated – corporate expenditure on art collecting and the duties of directors and officers of corporations
The article examines the most important reasons why a corporation may collect art – as an investment, in furtherance of corporate social responsibility goals and in order to enhance the psychological well-being of employees – and concludes that while art collecting for such purposes does not amount to a breach of directors’ duties, this is subject to the requirement that a corporation put into place safeguards contained in a formalised art collecting and sponsorship policy, the key principles of which are stated at the end of the article
The art rental market reflects diverse business models and these differences can have different impacts for the factors which may be at the forefront of a director’s mind: being known as an artist-friendly firm could have better implications for corporate social responsibility, the ability to credit rental payments towards purchase of the painting could be more justifiable from an investment perspective than just renting the piece, owning works may cast the company as a ‘custodian’ rather than mercenary which has better public relations implications, but the opportunity to cycle through varied pieces over time could make for a more dynamic office environment for employees
Summary
This article examines the relationship between two areas which may on the face of it appear to be unrelated – corporate expenditure on art collecting and the duties of directors and officers of corporations. Part 2 discusses the scale and nature of corporate expenditure on collecting, focussing on the shift from executives driving corporate art collecting to the use of corporate curating professionals, and changing attitudes toward acquiring contemporary art for corporate collections. Part 3 discusses the duty of directors and other corporate officers under Australian law to act in the best interests of the corporation and to exercise powers for a proper purpose, and how these duties interact. Part 4 examines the circumstances in which expenditure on art collecting is or is not consistent with directors’ duties. Part 5 concludes by outlining general principles which should govern boards in formulating policies relating to expenditure on corporate art collecting
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