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n
ghts but these rights must be matched by their corres-
ponding responsibilities, which require company direc-
tors on behalf of their shareholders to discharge their
social responsibilities as well as to protect their legiti-
mate interests. Disclosure, as the price of limited lia-
bility must today be discussed throughout by reference
t o
a multiciplicity of criteria. To the needs of creditors
and investors must be added those of the consumer,
the public interest and especially the hitherto ignored
employee.
Regarding creditors and investors, the balance of
Power within the firm has become very different from
that envisaged by company law since the shareholders
meeting became a mere formality. We must balance the
need to protect shareholders with the need to give
directors sufficient power and freedom to manage the
company efficiently. Indeed, the problem of maintaining
control of management by shareholders is a point where
me crisis of modern company law becomes apparent.
* o say that it is useless to provide investors with further
safeguards which they would not use is a counsel of
despair. Nationalisation would not seem to solve the
Problem as power is not more widely shared in the pub-
he rather than in the private sector and in many cases
me converse is true. The public corporation solves the
Problems of the relations between the shareholders and
managers by abolishing the former, but this does not
s
°lve the problem of controlling managers. We should,
Perhaps, aim at greater training for management so as
l
o make directors more aware of their responsibilities to
shareholders. I admit no easy solution is possible.
Greater disclosure here would make it possible for
me financial press to analyse the performance of com-
panies and this would give further protection to mem-
bers. However, journalists are thwarted in their valu-
able role and feel inhibited by the law, in particular
me law of defamation, which is such that any error,
however slight can lead to heavy damage regardless of
he good faith of the publisher as exemplified by
Lewis
£ Daily Telegraph
(1964) 2 Q.B. 401, where a jury at
mst instance awarded £100,000 compensation for libel
arising merely by innuendo! Disclosure would therefore
have to be buttressed by an extension of privilege which
could provide that a publisher who acted in good faith
and without malice or negligence would not be liable;
and in view of the services rendered by the press, this
^ould seem but a slight concession. As company ac-
counts are difficult for a layman to understand, addi-
honal disclosure supported by privilege would provide
bmre information for the press to use as a basis for
comment.
Relationship between management and employees
, If the relationship between management and share-
nolders gives rise to problems which company law has
n
°t satisfactorily solved, the relationship between man-
agement and employees presents problems which com-
pany law has not even recognised as being its concern.
Th is vexed question is, in fact, a dominant theme in
he current debate which flows over from company to
abour law. It is generally accepted to be unreal for
company law to ignore the fact, as at present it largely
?es. that the workers are as much, if not more, a part
j . the company than the shareholders. For example
fish law imposes the duty on directors to accept a
'gher offer, in the interests of shareholders, from an
asset stripper who would close down a business, rather
han a lower bid from a buyer who would keep the
business open, regardless of the interests of employees.
In this area it could be stated that company law, which
looks at the entire management structure from a capi-
talist viewpoint, has been largely overtaken by events.
The new outlook of the second half of the twentieth
century would stress the importance of the people who
devote the greater part of their lives to the company
that employes them and would change the law accord-
ingly. The structure of the firm can no longer be deter-
mined by a
laissez faire
approach to economic matters.
A company must now reconcile the interests of capital,
labour and the community, which may be in conflict.
Two obvious arguments can be advanced in favour of
employee recognition by company law. T h e first is that
industrial relations would improve as a result, which
would lead to greater productivity. At present it is
believed that much industrial unrest is caused by the
lack of communication between the employees and the
management. Secondly as a matter of social justice,
the fact that the employees contribution to the well-
being of the company takes the form of labour is not
sufficient justification from even recognition by com-
pany law. Unlike shareholders who can spread their
capital through several firms and reduce their risks, an
employee cannot easily divide his labour between seve-
ral employers so that his welfare may be more closely
linked with the success of the company than is the
case with average shareholders.
At present the directors may legally act only for the
benefit of employees only when this would be for the
benefit of the company.
As Mr. Justice Plowman stated in
Parke v. Daily
News
(1962) Ch. : " The view that directors are en-
titled to take into account the interests of the em-
ployees is one which may be widely held, but such is
not the law."
Th e duties of the directors are to the company "as
a whole" and it is improper for a director to act solely
in the interests of a particular member or group of
members. Therefore, it is wrong for a director to act
solely for the benefit of employees. This is the place
where I believe capitalism is unacceptable at law, and it
is where I believe the law should be amended so as to
bring it more in touch with reality. Surely a company
cannot be allowed to go on pretending that the worker
is not there.
Proposals for fundamental change in the interests of
employee:; and the community, are now taken more
seriously by more people. These proposals have, of
course, given rise to much controversy as well as being
the outcome of it. It is however, noteworthy that pres-
sure for change has come from many different circles
—lawyers, economists, employers, trade unions and even
the Church. T he Church, however, while taking up
quite progressive attitudes on these issues has not gone
further than stating broad principles. Wh at may finally
emerge may be the progressive adaptation of business
to the actual logic of a mixed economy in which many-
interests have to be reconciled.
No one can take exception to this "liberal" aim which
begs favours from no party or ideology. For the com-
pany is a human community and as such should ensure
the well-being of those who take part in its activities.
Th e Minister for Justice as the representative of the
present Coalition Government should not miss the
opportunity to amend our Company Law, so as to make
capitalism acceptable at law.
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