Research Handbook on Directors’ Duties

Research Handbook on Directors’ Duties

Research Handbooks in Corporate Law and Governance series

Edited by Adolfo Paolini

Directors’ duties and liabilities have become the centre of a general legal discussion following the 2008 financial scandal that resulted in global recession. Questions have arisen regarding the ways in which the directors of the world’s major financial institutions have handled their duties and how their decisions have impacted investors, shareholders and consumers. This detailed Handbook discusses the nature of the relationship between a company and its directors, assessing issues such as how duties are discharged, liabilities that may arise and what interests directors should consider before embarking on commercial ventures.

Chapter 13: The relationship between investors and corporations after the financial crisis

Anita Anand

Subjects: law - academic, company and insolvency law, comparative law, corporate law and governance


Investors are consumers. They purchase a good called a ‘security’ in a market. Although the security carries value or potential value, it is intangible. The consumer may never see evidence of the security itself, especially if he or she executes the purchase through a dealer or other intermediary. Nevertheless, this consumer has at least one purpose in mind, to turn a purchase into a profitable investment. When numerous consumers purchase and sell such securities, a capital market is born. In Canada, investing is a widespread phenomenon. Approximately 50 per cent of all working Canadians are directly or indirectly invested in the securities market (IIAC, 2007) and 55 per cent of Canadians own securities outside a retirement savings plan (such as a company-managed pension plan, RRSP or RRIF (CSA, 2012)). In the United States (US), about 49.9 per cent of all family-owned securities in 2010 are invested in similar retirements savings plans. In continental Europe, the proportion of households estimated to be investing in the stock market ranges from 15 to 20 per cent (Guiso et al, 2002). Similar proportions of stock market participation exist across other developed market economies.

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