This article analyses the effectiveness of s.172(1) of the Companies Act 2006. This was introduced in order to improve directorial decision making in companies, in particular requiring company directors to have regard to the interests of various stakeholders. This approach was designed to promote "enlightened shareholder value". While having regard to stakeholders’ interests is not in itself a bad idea, the manner in which this requirement was drafted proved unsatisfactory, in particular its lack of enforceability. The many financial scandals starting from around 2008 indicated that mere lip service had been paid to the requirement. Ironically, directors are now having to do what the parliamentarians hoped s.172(1) would achieve, mainly because of the reputational hazard for those companies if they continued in their previous ways, but not because of s.172(1) itself. It is suggested that s.172(1) is cumbersome and toothless, and that any review of company law should use the proposed simpler wording to be found in the forthcoming Irish Companies Bill.
|Number of pages||17|
|Journal||The Juridical Review|
|Publication status||Published - 2014|
- Directors' powers and duties
- Comparative law