The Role of the Directors

Abstract

This chapter describes the role of the directors. The duties of the directors are owed to the company and while the shareholders are the primary indirect beneficiaries of those duties, the law integrates the interests of creditors and also of wider society. The law is primarily focused on ensuring compliance with the Companies Act and the constitution rather than with the enhancement of economic interests. The Company Directors Disqualification Act 1986 serves as a mechanism through which the public interest is integrated into company law, while the UK Corporate Governance Code adds a further procedural dimension to the operation of the board of directors. The chapter then looks at how the idea of designing remuneration in a way that guides the directors to act either for the benefit of the shareholder or for the benefit of the company is flawed and has served as a motor justifying increasing rewards without bringing about commensurate increases in performance. It also analyses the duties of the directors to keep accounting records and to produce financial reports.