The Founder Liability
The Context
On 17 September 2026, Frank Stronach—billionaire founder of Magna International—will be sentenced in Toronto for two criminal convictions: one count of sexual assault and one count of indecent assault, related to incidents in 1977–78 and 1983–84. The verdict, delivered by Ontario Superior Court Justice Anne Molloy, followed a trial involving seven complainants and twelve charges. Five charges were withdrawn; three resulted in acquittals. Stronach remains on bail, facing a second trial in Newmarket in 2027 involving similar historical allegations from additional complainants. The original police indictment spanned 18 offences and 12 complainants, spanning three decades.
The Risk
This case is not merely a personal criminal matter. It signals a systemic governance failure that may expose directors to personal liability under New Zealand law. The conduct occurred while Stronach was the dominant founder-chairman of Magna International—a company that still bears his name and legacy. Under the Health and Safety at Work Act 2015 (HSWA), directors and officers owe a statutory duty of due diligence to ensure the organisation meets its workplace health and safety obligations, including the prevention of workplace harassment and sexual violence. Where a board tolerates a ‘founder immunity’ culture—where a powerful individual operates without effective internal checks—the regulator may argue that directors failed to exercise reasonable care. The maximum penalty for a director under HSWA section 48 is a fine of up to $600,000 and/or imprisonment for up to five years. Additionally, under the Companies Act 1993, directors may face personal liability for breach of duty of care (section 137) if they fail to act with the care, diligence, and skill of a reasonable director in the circumstances. The Stronach conviction demonstrates that historical misconduct by a founding figure can resurface decades later, triggering criminal proceedings, civil suits, and regulatory interest. For any board that continues to associate with or benefit from such an individual without robust due diligence, the liability hook is clear: you may be held personally accountable for a failure of governance that enabled the abuse.
The Control
The strategic solution is to sever the link between corporate identity and founder liability. This requires a formal governance review: (1) commission an independent investigation into historical allegations of misconduct involving any current or former senior figure; (2) implement a zero-tolerance policy on workplace harassment with mandatory reporting to the board; and (3) ensure the board’s due diligence obligations under HSWA are documented and audited annually. If the founder is still alive and associated with the company, the board must consider whether continued association constitutes a reputational and legal risk that outweighs any commercial benefit. The time to act is before the next complainant comes forward—not after.
The Challenge
These are the critical questions you should be raising at the board table:
| What documented evidence does the board hold that the organisation has undertaken an independent investigation into any historical allegations of sexual misconduct involving current or former senior executives, and what were the findings? | |
| Does the board’s due diligence framework under HSWA explicitly address the risk of a ‘founder immunity’ culture, and how is this risk monitored and reported to the board quarterly? | |
| What is the board’s legal advice on the personal liability exposure of each director if a historical sexual misconduct claim is brought against a current or former senior figure, and how does this advice inform our risk appetite? |