Corporate Governance

Question 1

Sample Exam Question

Answer 1

‘[t]here should be no confusion (of which there is evidence) of the duties which
Mr. Ford conceives that he and the stockholders owe to the general public and
the duties which in law he and his co-directors owe to protesting, minority
stockholders. A business corporation is organised and carried on primarily for the
profit of the stockholders. The powers of the directors are to be employed for that
end. The discretion of directors is to be exercised in the choice of means to attain
the end and does not extend to a change in the end itself, to the reduction of profits
or to the nondistribution of profits among stockholders in order to devote them to
other purposes.’
(Dodge v Ford Motor Company (1919) 204 Mich 459; 170 NW 668.)
If this statement is applied to the UK, would it remain true?

Advice on answering the question
u Establish that, traditionally, UK company law has been focused on the
shareholders. You could also qualify this by stating that the courts have also
allowed directors quite a lot of discretion that indirectly allows stakeholders to
benefit.
u Discuss the stakeholder debate generally.
u Discuss the CLRSG’s report on corporate governance matters, the reformulation
of directors’ duties in the CA 2006 and the controversy surrounding the
introduction and repeal of OFR.
Remember to apply your findings to the question you have been asked.