Edited by Stephen Tully
Chapter 5: Regulating the Approach of Companies towards Employees: The New Statutory Duties and Reporting Obligations of Directors within the United Kingdom
Simon Goulding and Lilian Miles Introduction The question as to whether in law the directors of companies ought to give greater consideration to non-shareholder interests continues to receive attention. Those persons who are employed by a company in the private sector will be concerned with their terms and conditions of employment, job security and, if there is one to which they have been contributing, their company pension. The shareholders of the same company who on a proprietary view, are the owners of the company, will have rather different priorities, namely dividend payments and the capital growth in the value of their shares. The directors who control the company may of course, be some of the most significant employees themselves but, as they are appointed by the shareholders and can ultimately be removed by them, will focus on the shareholder interests and this in any event is what the law, which endorses the proprietary view, will require. It has been argued many times that the vehicle of incorporation must be employed for the good of society generally and not simply as a means to line the pockets of shareholders (Dodd, 1932; Wedderburn, 1985a, 1985b, 1993; Norwitz, 1991). This is often referred to as the ‘pluralist approach’. On the other hand, it is argued that restricting company management to the single objective of profit maximisation is the most efficient way of using companies to contribute to the wealth of the economy (Hutton v West Cork Railway Company (1883) 23 Ch D 654;...
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