The Gazette 1974

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

°lve the problem of controlling managers. We should,

Perhaps, aim at greater training for management so as

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

°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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