The corporate objective: reinterpreting directors’ duties

This thesis aims to find the model of the corporate objective which is most likely to provide maximum wealth for all participants in the company. The corporate objective deals with the question: in whose interests should a company be run? This question is answered by providing a legal and theoretical argument that it is best for all participants if directors focus on maximising the wealth of the company as a separate legal entity. The entity focused approach requires directors to prioritise the interests of the company as an entity ahead of the interests of any shareholder or stakeholder groups. The thesis also argues that it is possible to practically implement such a model in Ireland. Currently Ireland implements a shareholder value approach with the duty to act in the interests of the company being equated with a duty to act in the interests of the shareholders. However, with a reinterpretation from the Irish courts as to what it means to act in the best interests of the company, an entity focused approach can be implemented. It is submitted that there is a sufficient legal basis for the Irish courts to make this reinterpretation. It is also submitted that enforcement of the entity focused approach can be ensured through the directors’ duty to act in good faith. Compliance with this good faith duty is a question of honesty and it is submitted that the test being applied for honesty is an objective one. This objective test means that it will be possible to hold directors to account when they fail to act in the best interests of the company. This thesis argues that in comparison to other models such as shareholder value, stakeholder theory and Enlightened Shareholder Value, the entity based approach provides the greatest potential for a company to maximise benefits for all its constituents