Corporate Management- Directors' Duties

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“Most Companies Acts of the region contain a provision requiring directors have to regard to the “interests of company employees in general”. Seemingly introducing a new stakeholder philosophy into company law, the precise import and significance of such a requirement remains a mystery.”

Discuss.

Introduction

Company directors are like the shepherds who always try to convince the sheep that their interests and his are one and the same. Alolf Berle and Gardiner Means in Modern Corporation and Private Property cast an aura of suspicion over managerialism in companies characterized by a separation of ownership and control. They contended that in modern corporations, managers decide how a corporation’s capital is spent, how resources are allocated and what endeavours are undertaken by the company but do not themselves own the capital or resources. Experts in corporate and securities law, management consulting and academia have wrestled with reconciling the divergent interests of those who own corporations and those who control them. The corporate scandals - ENRON (2001), WORLDCOM (2002), Vivendi (2002) and Tyco (2002) - have shown that there are unresolved tensions. Whilst at the banquet of statutory protection, shareholders and creditors feast on regulation protecting their interests in the company, be it solvent or insolvent. Labour is noticeably absent. Whilst the commercial realities indicate that maintaining good relations with creditors, suppliers, customers and workers are all important parts of maximizing profitability, directors do not owe a fiduciary duty to these corporate constituencies. The novel stakeholder ideology challenges the stockholder dogma which pervades corporate management structures, finding expression in regional company laws. This paper analyses the statutory duty of corporate directors, the intricacies of the relationship between the company and the employees thereof, and whether in light of the apparent deficient companies’ legislation (inadequately recognising employees as stakeholders with a right of action) other statutory measures act as an effective buffer solution.

Directors

Given the direction the law has taken in respect of director’s liabilities, it is important to be able to identify those persons who will be taken to be acting as directors and those who will be liable for their acts and omissions. The Trinidad and Tobago Companies Act defines a director ‘in relation to a body corporate, means a person occupying therein the position of a director by whatever title he is called’. Three types of directors can be identified in the Caribbean, de jure directors, de facto directors and shadow directors. A de jure director is one validly appointed according to the by-laws of the relevant company who has consented to his appointment. A de facto director is a person who acts as a director of a company but who is not officially appointed. A shadow director is someone who controls the directors of a company, but who is not seen to do so, acting either through de jure or de facto directors.

The conundrum of nominee directors, poses its own problems in identifying that the directors are acting bona fide in the best interest of the company. The commercial reality may tempt the nominee to look after the interest of their appointer (who is frequently their employer) rather than those of the company to which appointed. Australian and New Zealand case law has taken a more practical approach than the English courts in that “nominee directors need not necessarily approach company problems with an open mind and they many pursue their nominator’s interest provided that, in the event of conflict, they prefer the interests of the company. “ The directorships of many companies, for example the Ansa Mc Al Group of companies, reflect the Caribbean reality that many large companies in the region began as family-owned businesses with some moving beyond the category of small businesses. This...
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