Stakeholders and Directors' Duties: Law, Theory and Evidence

54 Pages Posted: 12 May 2009 Last revised: 3 Jul 2012

See all articles by Shelley D. Marshall

Shelley D. Marshall

RMIT University

Ian Ramsay

Melbourne Law School - University of Melbourne

Date Written: June 29, 2012

Abstract

An important debate concerns the meaning of the duty imposed on company directors to act in the best interests of the company. Are shareholders' interests paramount when directors act in accordance with this duty? To what extent can the interests of stakeholders other than shareholders be considered by directors? Does this duty need to be changed to facilitate socially responsible behaviour by directors? There have been significant international developments addressing these questions. For example, in the United Kingdom the duty to act in the interests of the company was reformulated in 2006. In Australia, two recent government inquiries have investigated these questions. However, the two government inquiries lacked empirical evidence regarding how directors understand their legal duties. This paper assesses the findings of the two government inquiries against the results of a survey of directors which inquired into how company directors balance the competing and sometimes conflicting interests of stakeholder groups, including employees, creditors and shareholders. The paper also investigates the extent to which the current law of directors' duties permits directors to consider the interests of stakeholders other than shareholders.

Suggested Citation

Marshall, Shelley D. and Ramsay, Ian, Stakeholders and Directors' Duties: Law, Theory and Evidence (June 29, 2012). U of Melbourne Legal Studies Research Paper No. 411. Available at SSRN: https://ssrn.com/abstract=1402143 or http://dx.doi.org/10.2139/ssrn.1402143

Shelley D. Marshall

RMIT University ( email )

Melbourne Campus
Building 13
Melbourne, Victoria 3000
Australia
+613 99251382 (Phone)

HOME PAGE: http://www.rmit.edu.au

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

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