June 2021 Exam Part A

Question 1

Explain how the Enlightened shareholder value approach in s172 of the CA2006, attempts to reconcile the shareholder value and stakeholder approaches to corporate governance (5)

Answer 1

The shareholder value approach to corporate governance is the view that the board of directors should govern the company in the best interests of its shareholders (1)

The stakeholder value approach requires the board to have regard to the view and interests of all the company’s stakeholders, including employees and local community (1)

The enlightened shareholder value approach in s172 if the CA2006 combines these two approaches by imposing a duty on directors to act in the way they consider would be mostly likely to promote that success if the company for the benefit of its members/shareholders as a whole and have regard to the matters listed in that section (1). The matters listed include the likely consequences of any decision in the long-term and the impact of the decision in a range of stakeholders (1)

This approach does not require the directors to act for the benefit of any other stakeholders, it to balance interests, but requires them to determine what action would best promote the success of the company while considering stakeholder interests (1)

Question 2

Answer 2

Question 3

Answer 3

Question 4

Answer 4

Question 5

Answer 5