Shareholder Primacy Revisited: Does the Public Interest Have Any Role in Statutory Duties?

Abstract

The conventional view of corporate regulation is that corporations are to be managed for the benefit of their shareholders. The general law and statutory duties of directors and officers reflect this "shareholder primacy norm," with duties formulated to prevent directors acting otherwise than in the interests of shareholders. However, the general law and statutory duties are not identical. The remedies and enforcement mechanisms differ considerably, which raises the question as to whether the public enforcement of statutory duties carries with it a public interest mandate that general law duties do not. This paper considers what role the public interest should have in enforcing statutory duties and whether such a role represents a challenge to the dominant shareholder primacy norm of corporate law. This issue is highly topical as recent decisions have suggested that the statutory duties of directors and officers are limited in their scope to protecting the interests of shareholders, even to the detriment of the public interest. We contest that viewpoint and argue that, at least in relation to statutory duties, directors and officers have obligations that extend beyond the narrow conception of the protection of shareholder wealth.

Keywords: Corporations Act, directors, duties, public interest, Maxwell, ASIC, shareholders, ratification, James Hardie

JEL Classification: K22, K42