Table of Contents

Corporate Governance after the Financial Crisis

Corporate Governance after the Financial Crisis

Edited by P. M. Vasudev and Susan Watson

The financial crisis of 2008–09 raises questions about the assumptions that underpin corporate governance. Shareholder value and private ordering may not in fact be the best means of promoting efficiency and corporate responsibility and the mechanisms used to ensure management accountability may not be effective. In this fascinating study, experts from around the world draw on the experience of the financial crisis to explore topical issues ranging from shareholder primacy and the corporate objective to the stakeholder principle, business ethics, and globalization of corporate governance principles. The chapters are provocative, acknowledging that our understanding of fundamental questions of corporate governance is still developing and demonstrating that the corporate governance debate is far from over.

Chapter 3: Derivation of Powers of Boards of Directors in UK Companies

Susan Watson

Subjects: business and management, corporate governance, law - academic, company and insolvency law, corporate law and governance

Extract

Susan Watson STATUTORY SOURCE OF POWERS OF BOARDS One of the major characteristics of the corporate form is and always has been the separation of ownership (in shareholders) from control (in boards of directors) (Berle and Means 1932). As Stephen Bainbridge says, ‘Corporation statutes effectively separate ownership from control. Indeed this de jure separation of ownership and control is one of the chief features distinguishing the corporation from other forms of business organization’ (Bainbridge 2009). The default position in most jurisdictions is that the statute gives powers to the board of directors. In the US (with the exception of Missouri), boards derive their authority from the statute. The Model Business Corporation Act states that ‘[a]ll corporate powers shall be exercised by or under the authority of the board of directors of the corporation, and the business and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors.’1 The Delaware General Corporation Law states that the ‘business and affairs of every corporation organized under this chapter shall be managed by or under the direction of the board of directors . . .’ (§ 141). Section 128(1) and (2) of the Companies Act 1993 (NZ) gives the function of the management, or direction or supervision, of the business and affairs of the company to the board of directors, as well as all the powers necessary to perform this function.2 Similarly, section 198A of the Corporations Act 2001 (Australia) is a replaceable...

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