First Class revision notes on Company law for the LLB, based on Durham University lectures. These notes contain over 50 academic references, cases and judge commentary, laid out on an easy-to-flow structure, a step-by-step guide and clear examples. Having these notes to hand will radically shorten ...
PART 6: CORPORATE GOVERNANCE
Defining Corporate Governance:
UKs focus is soft law, not statute, there is no authoritative/agreed definition
Cadbury Report 1992, para 2.5: Corporate Governance is the system by which
companies are directed and controlled
Moore and Reberioux: Although Corporate Governance applied to any incorporated
entity, scholars in this area tend to be primarily concerned with ‘public’ or listed
entities, whose securities are traded on regulated liquid investment markets
Separation of ownership and control:
Bhagat and Black: Over the past decade economic and legal scholars, mainly in the
US have increasingly questioned the alleged link between good corporate governance
and corporate performance
Forbes and Milliken: the board is the elite and episodic decision makers
Berle and Means: produced empirical work to look at 50 years of US corporate law
o Increase in larger public companies with dispersed SH who elect expert boards
to manage the company on their behalf.
o This leads to a professional elite
o This happened at a later stage in the UK, but there is also a separation of
control
o In 1963 – individuals owned 54% of company’s shares, contrasted to 2016 –
only 12.3% of shares
o Consequently, SH no longer in control of these big companies, Conesus is that
this problem is now more pronounced
o Elite have too much corporate power, they are unaccountable, there are no
checks on decision making
Parkinson: UK law says very little about protection to anyone that isn’t a SH
The implications of the governance of large, listed companies:
Management versus all SH: ‘agency cost’ problems
o Jensen and Meckling: Theory used to explain and predict how boards affect
company performance
o Berle and Means: pioneering observations of the loss of effective democratic
control by SH
o Manning: Berle and Means saw the mass of SH as victims whose franchise
had been usurped.
o The usual normative inference is that Ds broad administrative discretionary
powers must be managed and contained
o Might not be using their powers to benefit the company/ enhance value. Might
use authority to benefit themselves
o UK company law deploys multiple rules to regulate this power
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