An analysis of corporate legal structure and the evolution of an alternative ownership-control system
Dignam, Alan John
(1995)
An analysis of corporate legal structure and the evolution of an alternative ownership-control system.
PhD thesis, Dublin City University.
Chapter one is divided in two parts. Part 1
examines the component elements of the model
company. Part 2 examines the way in which the
model company hypothesized in Part 1 has been
eroded. The chapter concludes that a combination
of judicial interpretation and statutory
intervention regarding the elements of the model
has made it unworkable. Chapter two focuses on
the model legal control element of the company,
the board of directors. It examines firstly the
model function of the board. It then examines
how the exercise of the directors' managerial
discretion can be interfered with by the
members. It concludes that the board has been
degraded to a secondary organ. Chapter three
examines the effect of the institutional
investor on the degraded model legal structure.
It concludes that the presence of a large
shareholder within the company with interests
other than those of the company to pursue, has
a further degrading effect on the model legal
structure of incorporated companies. Chapter
four focuses on the directors duty to act "bona
fide in the interests of the company" and finds
that the judicial definition of that duty has
considered the shareholders interest as
paramount. Here the directors' discretion within
this duty to make decisions based on the long
term or future interests of the shareholders has
been eroded by remuneration schemes designed to
create a concurrence of interests between the
shareholders and the directors. Thus the
directors have a duty to act in the interest of
the shareholders, the majority of whom, within
public limited companies, are institutional.
Chapter five considers the conclusions from each
of the above chapters and examines one
particular example where the eroded model can be
clearly seen. This chapter recommends regulating
private and public companies separately and
suggests some potential answers to the eroded
model legal structure.