DIRECTORS' FIDUCIARY DUTIES AND INDIVIDUAL SHAREHOLDERS
Paul L. Davies
The articles of association of companies whose directors and shareholders are not congruent groups, necessarily confer a wide range of discretionary powers upon the directors and senior managers of the company. This chapter, and its companions in this section of the book, are concerned with various aspects of the question of what role the law relating to the exercise of those discretionary powers plays in rendering directors and senior management accountable. To whom do the lines of accountability run in the law's eyes? How rigorous is the scrutiny that the law enforces? How easy is it to invoke the legal process if a breach of duty is thought to have been committed? These are the questions to which courts and commentators have addressed themselves when considering the law relating to directors' duties, and this chapter will examine some aspects of that debate.
The chapter will focus upon directors' fiduciary duties as defined by the common law. Although particular aspects of directors' duties, notably those applying where there is a possibility of conflict between the directors' personal interests and duty to the company, have been regulated by statute,1 the 1970s plan2 for a general statutory statement of directors' duties was never put into effect. Consequently, the fundamental propositions in this area have still to be derived from judicial decisions, upon which statute acts as a gloss, albeit an increasingly significant and complex gloss. Furthermore, this chapter will not consider the full range of duties imposed by the common law upon directors. Rather, the focus will be upon what is in at least theoretical terms the central common law duty, namely the duty placed upon directors to regard the welfare of the company as the central objective of their activities as directors. Our concern will be to ask what legally enforceable rights the duty placed upon directors to promote the interests of the company gives to individual shareholders.
At first glance, this last question does not appear to open up a fruitful line of enquiry. Standard formulations of directors' duties, at least in the legal____________________