Sarabjeet answered on
Aug 02 2020
Responsibility of a company director
Responsibility of a company director
Assessment Task 2
Many traditional corporate law principles hold that companies should be managed to promote the shareholder civil liberties. An activity that benefits non-shareholders constituencies may be seen as a means for an organization to increases its personal reputation and power. The interest of stakeholders may be interpreted as opposing the right of a shareholder to attain fair income for their investments. The interests of stakeholders and shareholders are very compatible as well as contribute to the long-term efficiencies moreover progress of the company. It’s further argued that it’s important to reach a
oad consensus on how to manage organization action to support the interests of the stakeholders. This report highlights how directors hold opinion that firm’s board of directors has a responsibility to place the interests of shareholders above all other stakeholder interests. Finally, recommendations for directors that will direct them when they are making board decisions so that they are responsive or quick to different stakeholder audiences is also discussed in this report.
Place the interests of shareholders above all other stakeholder interests 4
The responsibility of a company director is to place shareholder interests above those of other stakeholders 5
The Residual Claimants Argument for Shareholder Primacy 6
Recommendations for company directors that will guide them when making board decisions so they are responsive to diverse stakeholder audiences 8
As take apart the legal entity, the company has the two basic goals: survival as well as development. Shareholder value is not the company's goal; this is the result of company activity. While shareholders delegate their shares in the firm to the board of directors, the shareholders are one of the audiences that the board can consider when making a decision on the behalf of the company. This audiences (often refe
ed to as stakeholders) can also include other economic stakeholders, for example, bondholders or non-financial stakeholders for example workers, clients, suppliers moreover NGOs also representing different concern of civil societies. In face of restricted assets, no matters how large company is, directors should choose the importance of company's most audiences. Problems in company law relate to the purpose of the company's merger and management. Courts often interpret the interests of business as meaning interests of existing shareholder.
Place the interests of shareholders above all other stakeholder interests
Company regulations need directors to “fulfill best interests of business” to perform their duties. Traditionally, this sentence has been interpreted as extending only to “shareholders as a whole”. However, directors often face many competing interests when making decisions. In recent years, some courts have been prepared to allow directors to have more room to consider the interests of different people affected by corporate actions without infringing on the company's best interests (Areni, 2017). The court recognizes that taking action for the better interest of the businesses do not means that the directors should disregard interests of the “stakeholders”, for example, workers, creditor, and communities and countries in which the company operates can be affected through actions of a business. Taking into account this advantage is usually in long-term better interests of the company. However, no courts have acknowledged the responsibility of these stakeholders. As corporate governance advisor to the Australian Institute of Company Directors (AICD), AICD is also concerned that lots of company director believe that company's board directors are responsible for placing the interest of shareholder above all the other stakeholders.
The responsibility of a company director is to place shareholder interests above those of other stakeholders
A lot of executive around the world also believe that the company's BOD’s have the responsibility to put the interest of shareholders first. Nevertheless, these views of shareholder supremacy are ideology, not a law (Bridoux and Stofberg, 2015). The study of the board's fiduciary duties to the shareholders shows that numerous countries' laws reject the primacy of the shareholders' interest. As take apart a legal entity, the companies have two essential goals: survival moreover development. The shareholder values are not the company's goal; this is the result of company activity. While shareholders delegate their shares in the company to the board of director, shareholders are just one of the audiences that the board can assume when decisions making on the behalf of the organization. The AICD is a member of the board of directors devoted to making a helpful impact on the financial system as well as society by promoting specialized leadership and better governance (D'Silva, 2010). Shareholders are looking for greater investment in the governance and certain key decisions of the companies they invest in. This is especially true for long-term institutional investors who want to provide insights and feedback on corporate matters, especially the rise of shareholder activism...