An Analysis of Enlightened Shareholder Value in Light of Ex Post Opportunism and Incomplete Law

Keay Andrew and Zhang Hao
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Keay Andrew: Professor of Corporate and Commercial Law, Centre for Business Law and Practice, School of Law, University of Leeds.
Zhang Hao: Associate Professor, Department of Accountancy, City University of Hong Kong.

European Company and Financial Law Review, 2011, vol. 8, issue 4, 445-475

Abstract: In the UK's Companies Act 2006 the traditional shareholder value principle was modified by the introduction of the principle of enlightened shareholder value, the primary source of which is section 172(1). Included in this provision is a requirement for directors to have regard for the interests of certain stakeholders when exercising their duty to promote the success of their company, and this article refers to this as the principle of due consideration. Based on the incomplete law framework, this article reveals that the principle of due consideration for stakeholders has the potential effect of checking ex post opportunism on behalf of shareholders and/or directors against non-shareholding stakeholders. As such, this principle could make a positive and value-adding contribution to all concerned simply because ex post opportunism of any kind is unfair and bad for business. Moreover, our analysis further suggests that if the potential effect of the principle of due consideration is to become real, a process of trial and error in the form of actual cases brought to, and tried in, the courts over time is required.

Date: 2011
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DOI: 10.1515/ECFR.2011.445

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