CAN DIRECTORS OF COMPANIES IN A SHAREHOLDER PRIMACY AND ENHANCED SHAREHOLDER VALUE (ESV) REGIMES BE PUBLIC-SPIRITED?

Abstract

The board is the organ of the company that is saddled with the responsibility of managing the company. This includes making most corporate decisions. The said decisions affect not only the shareholders but non-shareholding stakeholders as well. In both shareholder primacy or profit maximisation and Enhanced Shareholder Value (ESV) jurisdictions, the primary duty of the directors is to further or promote the investment interests of the shareholders. The board is not duty-bound to consider the interests of non-shareholding stakeholders unless if doing so will promote or enhance the interests of the shareholders. The decisions or policies of the board in such jurisdictions are thus geared primarily towards discharging this singular responsibility. In fact, in a shareholder primacy regime, it is considered a breach of their fiduciary duty if the directors consider any other interests and, by so doing, shrinks the profits that would otherwise be available to the shareholders. This work sets out to consider/examine if a board in such regimes or jurisdictions can or should be bold enough to consider and integrate the interests of non-shareholding stakeholders, and where the circumstances permit, even prioritise it over and above those of the shareholders. The work observes that though this is not very common, it is very possible as there are ample principles of law and corporate legislative provisions that give a ‘willing’ board the leeway to do so. It concludes that it is in the overall interests of the shareholders that directors should adopt inclusivity approach even in a shareholder primacy jurisdiction as doing so has the tendency of, inter alia/; bolstering employees’ moral, dedication and commitment to the company and in turn their output; strengthen creditors confidence in the company and thus make more capital available to the company; foster friendlier relationship between the company and its host community and hence safer working environment for the company and its employees; increase the clientele-base of the company as it helps to boost clients’ or customers’ loyalty and patronage to the company; and reduces government’s regulation of the corporation and imposition of heavy fines for breach of the regulations. It is the cherished view of the writer that all these would, in the long-run, translating into higher investment returns for the shareholder.