Redefine the interests of company
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Introduction
It is clearly established that directors are under a duty to act bona fide in what they consider, and not what a court may consider, is in the interests of the company and not for any collateral purpose. Traditionally, this obligation to act bona fide in the interests of the company has been defined as an obligation to act in the interests of the shareholders and it is the directors' subjective opinion as to the interests of the corporators as a general body, balancing the short-term interests of the present members against the long-term interests of future members which counts. However, modern management often takes the view that the interests to be taken into account by directors in running a company should include the interests of not only the present and future shareholders, but also the company's employees, its customers and its creditors (including suppliers who provide goods on credit terms) and, in case of large public companies at least, the State and the general public. It is thought that from the point of view of strict law, while 'the interests of the company' may now include the interests of the company's employees, and in certain situations the interests of its creditors, it otherwise means the interests of the company as a commercial entity, to be judged in most cases by reference to the interests of present and future shareholders alone. Thus, an arguable question has arisen that whether British company law should develop a broader concept of 'the interests of the company' by adopting a 'stakeholder' approach, which requires directors to take account of the interests of all stakeholders and not just the interests of members, as in the case in some other common law jurisdictions and many civil law jurisdictions.
This essay will examine this debatable question as follows: Firstly, introducing the traditional definition of 'the interests of the company' and some developments of British company law. Secondly, it will analyse the 'stakeholder' theory, compared 'enlightened shareholder value' with 'pluralism'. Subsequently, it will discuss the British company law reform proposals concerned with this subject. Finally, it will show how the other countries deal with this stakeholding theory. In conclusion, British law should redefine the meaning of the phrase 'the interests of the company' and require company directors to take account of the interests of all stakeholders...