Enlightened Shareholder Value

Introduction

This essay will consider S 172 CA 2006 in reflection of true ‘enlightened shareholder value’ and the standard set out in same section in the lights of different theories on judgement ,merit of opinion and fact based on theoretical approaches in support of comments in evaluation of the standard which will lead to the conclusion of this essay. The quest to review the UK company law mostly based on common law started in 1998 by Department of Trade and Industry proposals were formulated for the review with mandate to Company Law Review Steering Group (CLRSG) to oversee the review for Trade and Industry in July 2001 which was later introduced to the parliament in November 2005 as the Company Law Reform Bill 2005 after rigorous debate, it was passed and became company law Act 2006.

Section 172 Of Company Act 2006

S 172 of CA 2006 contains duties of directors to stated groups with pacifying background that deviated from strict common law ‘shareholder’ based model to all ‘inclusive’ model which culminated in two theoretical approaches to be adumbrated in this essay later .S 171- 171 of CA apparently set out the duties of director,S170 states that the duties are codification of subsisting law and S 170 (4) states that the duties shall be ‘interpreted’ or ‘applied’ the same way as ‘common law’ and ‘equitable’ principles while interpreting the duties. This essay is within the scope of S 172 and the Section provides thus;

(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to-

(a) the likely consequences of any decision in the long term,

(b) the interests of the company’s employees,

(c) the need to foster the company’s business relationships with suppliers, customers

(d) the impact of the company’s operations on the community and the environment,

(e) the desirability of the company maintaining a reputation for high standards of business conduct, and

(f) the need to act fairly as between members of the company.

(2) Where or to the extent that the purposes of the company consist of or include

Purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.

(3)The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.

S 172(1) on duty to promote the success of the company was affirmed in the words of Lord Greene MR in Re Smith & Fawcett Ltd that directors are enjoined to exercise their power ‘bonafide in what they consider-not what a court may consider is in the interests of the company…’ .Directors must therefore exercise their power in their discretionary way based on their judgement that they have acted in consideration of making the success of the company their priority, acting bonafide in the context of Lord Greene word is acting in ‘good faith’ as modified in S 172 (1) of the Act which is a fiduciary duty owed by a director of the company. Inference from above shows that the duty is a ‘subjective test’ for a director to act the way he deems fit in good faith and not by what court objectively considered as appropriate way of action.For example in Regent crest Plc V Cohen,the court held by applying ‘subjective test’ that directors acted bonafide by ‘waiving the claw back claim’ had intention of maintaining a united board instead of allowing two of the directors to be engaged in litigation by the company. The fact that the action seems unreasonable to third party even when directors are acting in the interest of the company will not make the act a breach of fiduciary duty, this was affirmed in Extrasure Travel Insurances Ltd V Scattergood. It is an overall interest of Company that Court should not review the business decisions of the directors and this agree with the dictum of Lord Wilberforce in Howard Smith Ltd V Ampol Petroleum ltd that ‘There is no appeal on merits from management decisions to courts of law: nor will courts of law assume to act as a kind of supervisory board over decisions within the powers of management honestly arrived at’. The rationale for good faith is to make litigation in respect of the action of director unlikely. Directors can use good faith as defence for his action; the success of litigation against his action becomes remote. The advantage of this approach is that director is giving business freedom with ability to rationally think and take decisions in the best interest of the company. This independence will advance the company in the hand of an intelligent and right thinking director. The director is to act in the interest of ‘members as a whole’; doing this is acting ‘in the interest of the company’. Who are members of the company? This question was answered by court’s intention in the case of Brady V Brady where court interpreted ‘members’ to mean ‘present and future shareholder’. If members as a whole are shareholders, then S172 (1) is shareholder oriented, this will be discussed later with other theory. What constitute ‘success of the company’ in accordance to S 172 is

within the determination of members and ‘success of the company’ was articulated by parliament in their debates that it is ‘a long term increase in shareholder value reflecting the economic success of the company’.Moreover Keay is of the opinion that section 172 ‘does not require directors to give any guarantee of success and there is no ‘reasonable care’ requirement contained in the section’. However where a director fail to promote the ‘success of the company’, he can be in breach of S 174 of the Act, the section is on ‘duty to exercise reasonable care, skill and diligence’ which is a codification of common law principle. S 214 (4) of Insolvency Act of 1986 state an objective minimum standard of a reasonable diligent person in the office of director in the context of the functions undertaken, with that objective raised in particular attributes of the director in question. The director could be liable both on ‘objective’, subjective’ and sunshine test (misjudgement on trade anticipation) .If he knew there was no prospect in his trading decision for the success of the company as in strict provision of S 214 of Insolvency Act of 1986.S 172(2) refer to subsection 1 (a-f) as the purpose of the company, the purpose of the company is to benefit members and other group purpose shall be subservient to the purpose of protecting members or shareholders interest .Also subsection 3 oblige directors for the purpose of rule of law ; in peculiar situation and not in all circumstances, consider the interest of the creditors. Having discussed S172, the question is does ‘enlightened shareholder value’ reflect in the section discussed? This essay will consider answer to the question.

S 172 Ca 2006 As A Reflection Of ‘Enlightened Shareholder Value (Esv)

The Company Law Review was confronted with whether to consider ‘pluralist approach’ or ‘shareholder value’. ‘Pluralist approach’ can as well be seen in the light of ‘stakeholders value’ which its approach is based on all inclusive theory that the company is not meant for the shareholders alone but other stakeholders like employees, creditors, suppliers, customers and even the society.While ‘shareholder value’ that has its origin in common law and rooted in Anglo – American corporate world believe that profit must be maximised for the benefit of its member, it is ‘based on the idea that maximising shareholder value is in principle the best means of securing overall prosperity’. ‘Enlightened shareholder value(ESV)’ is a compromise of the two theories to accommodate all interests including shareholder by harmonising them as ‘ESV’.This ‘ESV’ supposed to be the content of S172 CA 2006 discussed earlier in this essay. A cursory look at S 172 CA 2006 shows a shadow reflection of ‘ESV’ but not a substance of it. In essence the section is not a true reflection of ‘ESV’, a compromise of the two theories but it favoured ‘shareholder value’ in all ramifications of higher weight. The Act are analysed here as shadow of ESV; Discretion

was unduly given to director in S 172(1), director is an agent of shareholders, the test of his action is ‘subjective test’ and not objective and what constitute ‘good faith’ in promoting the ‘success of the company’ for ‘the benefit of its members’ company is within his discretion and judgement and court can not even decide it, this is an unfettered power to shareholder through its agent, in the act the discretion can only be exercised towards stakeholders if it is for the ‘benefit of its members’ .This is not a true spirit of ‘ESV’; the discretional power of acting in ‘good faith’ while likely ‘promoting the success of the company’ cannot be fair as stated in paragraph ‘f’ to other groups as it was directed to member. The clause ‘so far a person of care and skill would consider them relevant’ inserted in the draft bill by the committee was removed, the clause could have restrained the directors unfettered discretional power and this was done with the consciousness of ‘shareholder value’ by the lawmakers. The clause ‘have regard to’ was not expanded in the act, the group mentioned in the Act other than members are to be considered for the benefit of ‘shareholder’ as they are not involved in decision making, shareholders can have input in meetings, call for statement of account, vote to appoint director or even sack them,

it is doubtful if other group can be consulted. Also, strangely enough in the Act, creditors were apparently not mentioned expressly in S 172(1) c though it may be pacified as part of ‘others’ in the paragraph but in S 172(3) Creditors interest was protected in ‘certain circumstances’ which is the time of insolvency of the company. Keay is of the opinion that the subsection was a codification of case law decided 20 years ago for the company to consider and protect the interest of creditors during insolvency and financial constraint.

The interest of ‘stakeholders’ in S 172 (1) like ‘employees’, ‘suppliers’, ‘customers’, impact of company in ‘community and environment’ were all subservient to the ‘benefit of members’. Good faith says director must act in the manner he consider appropriate to promote the ‘success of the company for the benefit of members’. what amount good means of promoting the success of the company is within the sole decision of director and not that of court as earlier stated, this section is solely based on ‘subjective test’ and there nothing to do if director failed to consider the interest of stakeholders for his defence of acting in ‘good faith’ to promote the ‘success of the company for the benefit of its members’ .Though this can be curtailed by S 170(3) -(4) but no reference was made to that in S 172.What constitute ‘success of the company’ is within the reasonability of the director but a director will breach S174 if his action is without ‘care and skill’. Moreover, only ‘shareholder’ of all groups in ‘ESV’ can sue in respect of breach of duty pursuant to S 260. All these show that the standard of ‘ESV’ in S172 is a bit step higher than that of common law ‘shareholder value’, a shadow of the substance even the little difference is insignificant with discretion given to director and ‘stakeholders’ interest subject to the interest of ‘shareholders’. ‘ESV’ is therefore not a true reflection of S 172 CA 2006.It is basically an adopted model of ‘ESV’ but it is gradually tending from strict common law model of ‘shareholder value’ to a partial reflection of ‘ESV’. The foundation laid in the Act and S172 will form the basis for improvement in future Act. This essay will consider corporate theories and standard set out in S172 critically.

CORPORATE THEORIES: ‘SHAREHOLDER’, ‘STAKEHOLDER’ VALUES AND ‘ESV’

Corporate theories will give a clear picture of their standard as set out in S172 .The corporate theories for discussion are ‘shareholder value’ or ‘shareholder primacy’ ‘pluralist approach’ or ‘stakeholders value’ and ‘enlightened shareholder value(ESV)’ . It has been stated earlier that ‘shareholders value’ and ‘stakeholder value’ compromise to be ‘ESV’ .

Pluralist approach’ benefit is well pronounced in its ‘communitarian’ phenomenon, it is all inclusive and this makes it a balanced affair because of the fair nature of all inclusive method. It broaden and enlarge business participation in the light of the company taking care of all interest, it also enables the ‘stakeholders’ to have access to information and have understanding of what is happening to their interest, however it may distract the management of the company and unnecessarily create bottleneck and enlarge business to whittle down fast decision process. Beside, other regulations aside company Act guiding the activities of ‘stakeholders’ like employees (labour law), consumer (competition law), creditors (insolvency Act 1986), community (environmental law and social law) can be used to weaken the claim of ‘stakeholders value’ in favour of ‘shareholder value’ while on the other hand shareholders are regulated by the Company Act and they seek the ‘success of the company’ better because their stake is higher in the company. Moreover it is expedient that members or shareholders of the company are part of corporate governance mechanism. It is important to note that only shareholder can ‘check and balance’ the activities of its agent, the director and other group have limitation in this regard. However, ‘shareholder value’ may be consider as the hollow scope of corporate governance rather than broad scope of ‘stakeholders’ all ‘inclusive approach’.

Furthermore, the company law review (CLR) weigh between adoption of either ‘pluralist approach’ or ‘shareholders value’ and found weaknesses in ‘pluralist approach’ in the light of its possibility of giving director wide discretionary managerial power, the power which

director can use against ‘shareholder value’, apart; pluralist can make director to lose focus from its major duty as decision maker. Moreover, stakeholder approach was considered unnecessary haven been regulated by other legislation apart from the Act.

CLR had the culminating technical obstacle in the adoption of ‘pluralist approach’ when it exemplified that when there is conflict of interest, whose interest prevail? Many interest responsible for adoption of ‘pluralist approach’ will rise for supremacy; this may cause confusion, therefore there is need to ascertain director’s duties separately in assuming responsibility of action and there is need to have board as well as shareholders with responsibility of appointing and removing them in line of readjusted division of power; and method to adopt for ‘enforcement’ of different duties as to be ascribed. These may be the reason for the adoption of ‘shareholder’ model in the gown of ‘ESV’.S 172 is shareholder friendly possibly because of its historical origin in common law and corporate practice of UK for many years before the Act, ‘shareholder value’ can further be summarised in the line of its importance thus; it has ability ‘to hold management accountable’ while annual report statement are sent to them for scrutiny and vote on same with ability to either retain or sack a director and even determine their salary at the AGM. This to the credit of ‘shareholder value’ provides a check on the power of director which ‘stakeholder’ lack requisite to do. Accountability of director in respect of listed company strengthened ‘ESV’ through ‘OFR’ but when it was abolished, it remains a strong factor against the paradigm of ‘ESV’.

In favour of ‘shareholder value’ is Article 1 of European Convention on Human Rights which allow ‘freedom of enjoyment of possession’, this look like a ‘capitalist’ tendency and this is what ‘shareholder value’ promotes, that is, they believe in ‘wealth creation’ ‘maximisation of profit’ which is adverse to ‘stakeholders” claim but the truth is that company’s wealth will benefit them, for example, employees job security will be guaranteed, profit tax will be paid to government and gift to the society through CSR. where there is no profit, it wont benefit ‘stakeholders’, this no profit no benefit rule is applicable to all including ‘shareholders’. Kiane affirmed that freedom to deal with property and wealth in a free manner to maximise the profitability of it is for the benefit of all groups in ‘ESV’.Here ‘contract theory’ comes in, where a firm is viewed as market where contract is the basis of its contact, this theory sees ‘shareholders as owners’ though control may separate from ownership, the theory further ‘justifies the imposition of the obligation to maximise shareholder profits as the company sole objective’ .Generally the term in corporate governance are contractual in nature because they are priced, the price which has a consequence on contract.Contractual analyst arrive at conclusion that corporation should pursue the sole goal of ‘shareholder value’ while on the other hand ‘stakeholders’ importance can be evaluated in the light of the fact that ‘shareholder’ are not the ‘sole residual risk owners’.Stakeholders are risk bearer as well because whatever affects the company affect them. Most importantly, company have to put the stakeholders interest in a paramount place for its success, this they can do by consulting them on vital decisions and shareholders can protect their interest in AGM and through non executive directors. Shareholders’ ‘profit maximisation’ within short term and ‘right to property’ and ‘wealth creation’ were argued also in favour of ‘stakeholder value’ that it is considered outdated ‘given effect of globalisation’,besides, tangible property are becoming less important by juxtaposing it with human development, resources and individual invention in firm like ‘IBM’ and ‘Microsoft’. Moreover, what a company give to society through CSR can determine its success; company should therefore go beyond ‘short term profit maximisation’. Assuming its employee go on strike, it will definitely affect its fortune. The Germany corporate governance is known for ‘co-determination’ which allow ‘employee constituency’ to be part of management team,that is, member of supervisory board, this is a perfect illustration of ‘stakeholder value’. Japan adopted stakeholder value in a revolving participation in board depending on the stakeholder that has the greater voice.

Stakeholder interest is important and abandoning it for ‘short term’ profit taking instead of ‘long term’ profit may spell doom for the company like what happened in Enron and WorldCom.UK shifted from extreme ‘shareholder value’ to ‘enlightened shareholder value’ incorporated in S 172 of CA 2006 because of some factors, inter alia is the ‘institutional investors’ activities and activism which collaborated with ‘stakeholder value’, also, ‘shareholders activist’ requested company to leave hollow scope of profit maximisation for ‘obligations of wider society’.Most importantly, as earlier mentioned, Germany and other EU had shifted predominantly to ‘stakeholder value’ while UK held on to ‘shareholder value’,the need to strike a balance called for ‘ESV’. On the other hand, extreme stakeholder may not be advisable in the light of what happened to Siemen company in Germany, this had made Germany to have rethink on sticking to extreme ‘stakeholder value’.Ideal ‘ESV’ could have been the best system in EU but the model adopted in S 172 is not the true reflection of ‘ESV’ and the standard tends towards ‘shareholder value’ with little modifications. 172(1) on duty to ‘promote the success of the company for the benefit of its member as a whole’ is ‘shareholder value’ oriented.

‘Members’ had been interpreted to be ‘shareholders’, also, paragraph (a) of the section which supposed to consider ‘long term’ interest of the company in the light of the believe of ‘stakeholder value’ was coined in the act in an unspecific term, the literal term is persuasive and not assertive by the word ‘likely consequences of any decision in the long term’. It is often possible that there may not be ‘likely consequences in the long term’ and this will erode ‘stakeholder’ ‘long term’ philosophy .Paragraph (b) which is on protection of employee was also coined as part of the whole meaning, subsection 1 on ‘benefits of the member as a whole’, makes ‘the interest of the company employee’ in the same subsection subservient to the interest of the members. Where the interest of members cease; the interest of the employee also cease as if the interest of employees is tied to the interest of members in the Act. The interest of the employee can not stand without the strong interest of the members. S 309 of CA 1985 which recognised and protects the interest of employee better than S 172 CA 2006 was without meaningful impact since it was never litigated as well as paragraph (b) of S 172 CA 2006 even when violated by director. This tempo is sustained in the light of S170 (1) CA 2006 categorical affirmation that the duty owed by director is to the company and not to the employee. The interest of members surpasses that of the employees. S 172 of the ca 2006 replaces that in S 309 of CA 1985,S 309 (1) which provides no enforcement remedies for the employees. S 309 requires employees interest to be of equal standard with interest of shareholder was a mere law in book and under S 172 ,it was completely eroded as employee was listed as one of the ‘stakeholders’ whose interest depends on promotion of the interest of ‘shareholders’. Interest of employees like other interests was made ‘subordinate to the primary obligation to promote the success of the company for the benefit of its members as a whole’ Having discussed part of the standard here, this essay will be specific in considering the standard in S 172 CA 2006 further below.

S172 Standard And Theories Discussed Above Evaluated Further

The standard set out in S172 is not a true reflection of ‘ESV’ as earlier discussed because the clauses in reference to stakeholders were made compliant to the interest of members or shareholder, there is no room for ‘co-participation’ in the Act. ‘Co- participation’ is the essence of ‘ESV’ but S172 tied every power to the apron string of the director who acts on behalf of the shareholders. The extent of consideration for the interest of stakeholder depends on the desirability in promoting the benefit and well being of the shareholder. Davies buttresses this by his submission that ‘it seems wrong in principle to regard this section as requiring the directors to ‘balance’ the interests of the members with those of the stakeholders’. He stated further that ‘‘The members’ interest are paramount, but the interests of stakeholders are to be taken into account when determining the best way of promoting the members’ interests’. In essence, the directors are to take cognisance of the interest of stakeholder in accordance to the section only if it is in the interest of members to consider it so. One will therefore wonder if ‘ESV approach’ in S 172 is a replica of old Common law principle which makes ‘shareholder value’ paramount. It is not direct duplication of it but a tainted model and what Davies called ‘a modest one’. The

standard that is a step bit higher than that of common law principle, It is a glossing duty conferred on ‘ESV’ , an improvement to meet standard. The essence of English and Australian corporate theory is that Shareholder delegate its managerial power to directors, the delegation which has constitutional connotation, director is to promote the interest of the shareholders but the discretionary and wide power of director can be stakeholders focus as co-holders. It was argued that directors power was conferred by the Act rather than delegation from shareholder and director’s power are conferred not by the constitution of the company but by legislation. Directors are expected to render account to shareholders at the AGM, they have power to call for statement and under S 172 there is implied implication that director must be abreast of the financial situation of the company.Also, it is the responsibility of director to prepare account in a year for presentation to the shareholders and this was adumbrated in the dictum of Lord Jauncey of Tullichettle in Caparo Industry PLC v Dickman that ‘…the purpose of annual accounts,

so far as members are concerned is to enable them to question the past management of the company, to exercise their voting rights, if so advised, and to influence future policy and management’. It is the ability of members to check and balance through their scrutiny of the account presentation and exercise their voting right for or against the management as a result. Rendering account to members may not be realistic in private company because the directors and shareholders are the same. Statement may be requested to be circulated under S 314 by members of the account kept under S 386 by directors. Financial situation of the company will determine if directors’ obligation will be fulfilled under S 172 (1) or S 172(3) is resorted to due to likelihood of insolvency.This is standard in this subsection to protect creditor, the duty to creditor in the context of S172 and in the light of ‘ESV’ has no nexus in common law, therefore, it is a duty owed by the director to the company as in common law and not to creditor, the duty owed to creditor under the section is not to a fiduciary duty.The creditors interest must be protected during insolvency because protecting the interest of shareholders will make creditors’ interest come under protection during insolvency which will make creditors lay claim to the asset of the company on the principle of limited liability, acting for shareholders will have to minimise risk by restraining trade if the company is insolvent and director must take objective step to protect creditor. S 214 of Insolvency Act 1986 is clear to the extent that directors action will be considered on objective standard and not on subjective standard if fail to take precaution towards insolvency. It may result to negligence on the part of director if he fails to do so. Creditors’ interest will be paramount during insolvency but enforcement action can hold while in liquidation and by liquidator.

S 172 only list matter for the rational consideration of director within his discretional power.The extent of directors compliance has no parameter, will board ever refer to it in their minute of meeting that ‘stakeholders’ interests are being cared for? The minute of meeting scarcely reflect ‘ESV’ standard. Directors are not under compulsion to give priority given to members to non- members, it is a standard fallen from the proposed ‘ESV’ under S 172.Nevertheless, S172 considered the interest of non members and the extent of its consideration shall be consider in light of the standard in the section. ‘ESV’ reflected modification of the various theories and this led to the rejection of industrial democracy but the employee was rather consider as one of the factors which director must protect in the ‘interest of members’. Though ‘stakeholders’ interests now have ‘legitimacy in relation to the governance of the modern corporation’, this is an improvement paradigm for ‘ESV’ ‘The 2006 Act strikes a pragmatic balance between providing legally binding guidance to directors as to how to fulfil their duties to reflect the interests of the various prescribed stakeholder interests,…declining to interfere with substantive business decisions’ for intance, company employees interest consideration is more potent in previous and recent legislation which makes it compulsory for the employees representative to be consulted, for example S 188 of the Trade Union and Labour Relations(consolidation) Act 1992, Regulation 13(6) and 13(7) of the Transfer of Undertakings(protection of employment) Regulation 2006 respectively state that consultation is considered important before agreement, if agreement is to be rejected by representative of employer, reason for such must be well articulated in their reply. In similar vein, employee shareholder can bring action under derivative claim to challenge sack, reduction in staff or any transaction in conflict with employees’ interest. Under S172, there has not been any litigation but with derivative claim, despite procedure inserted, claims may spring up in next few years, and this may affect ‘the promotion of the success of the company’ if reaction that will allow employee shareholder to bring the action to occur. There is no direct action mechanism by employees under the Act and S 172 can be viewed against the interest of those who wants specific duties for directors in protection of employees in the light of what Bird described as a ‘piece of window dressing’.

When it comes to the enforcement of duty which of the interest will hold sway, is it the interest of the shareholder or stakeholders? Company ordinarily will have nothing to do with interest aside the interest that relate with it whether ‘shareholders’, ‘employers’, ‘suppliers’, ‘customers’. Director is to act in accordance to S 172(1) which has no much quality of ESV in it but the director is to have regard to the interest of ‘employees’, ‘suppliers’, ‘customers’, ‘operations of the community and the environment’, ‘maintain reputation of high standards of business conduct’ and this particularly is the heart of ‘ESV’ approach, with this, it is clear that ‘shareholders’ interest may be predominant but the interest of other ‘stakeholders’ is important to promote the ‘success of the company’. The interest of stakeholders therefore needs to be protected by director, but under this ‘shareholder value’ approach, the extent of promotion of ‘stakeholders” interest is to promote the interest of the ‘shareholders’. Even though other regulations had taken care of ‘stakeholders’ like environmental law, labour and competition law, insolvency Act and others, it is submitted that no ‘shareholders’ can succeed or ‘create wealth’ where the employees are on rampage, strike, ill-motivated, or where the customers dislike their products or services or where the suppliers will prefer to go with the shareholders’ competitors. Bowen LJ in Hutton V West Corkry said that ‘Law does not say that there are to be no cakes and ale, but there are to be no cakes and ale except such, as are required for the benefit of the company’.The blessed judge was advocating for probable consideration of ‘stakeholders’ interest as at that time.

The directors’ basic aim and duties in the Act and not S 172 only is inclined towards ‘shareholders’ rather than ‘stakeholders’. Reflecting stakeholders interest in the board may work but in the view of ‘shareholder value’ it will slow down decision making and thus antithetical to the objective of promoting the ‘success of the company’. ‘ESV’ will become a theoretical malapropism to allow ‘shareholder’ interest hold sway without consideration for the interest of the ‘stakeholder’. ‘ESV’ going by S 172 is just a literary pun, there is no assurance that directors will consider the interest of ‘stakeholders’ in the light of consideration of ‘shareholders’ interest, so ‘ESV’ model is just a theoretical version different from practical version in consideration of actions of directors because directors’ duty is highly ‘subjective’ and not ‘objective’, it is what the director decide and not what court ‘objectively’ considered as in Regent crest plc case. The reform of Board is worth considering; it seems to be the only solution to balancing the interest of various interests in regards to unfettered power conferred on the director by the legislation.

In