The trend of Kansas courts looking to Delaware precedent has continued unabated. However, the trend of homogenization of fiduciary duty law as applied to different forms of entity has suffered some setbacks with respect to partnerships and limited liability companies. In addition, the law of corporate directors’ and officers’ fiduciary duties underwent a major paradigm shift shortly after publication of the original article. Like the original, the modest goal of this Article is to survey generally the law of fiduciary duties with respect to Kansas corporations, partnerships (general and limited liability), limited partnerships, and limited liability companies, and to illustrate the extent to which corporate law concepts and precedents are being applied (or not applied) in the context of these other forms of business organization. Part II considers fiduciary status, Part III the duty of care, and Part IV the duty of loyalty.
{"title":"Fiduciary Duties in Business Entities Revisited","authors":"Webb Hecker","doi":"10.17161/1808.20240","DOIUrl":"https://doi.org/10.17161/1808.20240","url":null,"abstract":"The trend of Kansas courts looking to Delaware precedent has continued unabated. However, the trend of homogenization of fiduciary duty law as applied to different forms of entity has suffered some setbacks with respect to partnerships and limited liability companies. In addition, the law of corporate directors’ and officers’ fiduciary duties underwent a major paradigm shift shortly after publication of the original article. Like the original, the modest goal of this Article is to survey generally the law of fiduciary duties with respect to Kansas corporations, partnerships (general and limited liability), limited partnerships, and limited liability companies, and to illustrate the extent to which corporate law concepts and precedents are being applied (or not applied) in the context of these other forms of business organization. Part II considers fiduciary status, Part III the duty of care, and Part IV the duty of loyalty.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"17 4","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113978913","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the effectiveness and the independence board by using all firms listed on the main board of China from 2000 to 2009. I find significant inverse relationship between supervisory board size and firm performance. In addition, I find evidence of a significant nonmonotonic relationship, Tobin's Q and ROA first decline and then increase as the independence of supervisory board rises. The results are consistent with prior studies.
{"title":"The Effectiveness and Independence of Supervisory Board: Evidence from China 2000-2009","authors":"Peng Wang","doi":"10.2139/ssrn.2223990","DOIUrl":"https://doi.org/10.2139/ssrn.2223990","url":null,"abstract":"This paper examines the effectiveness and the independence board by using all firms listed on the main board of China from 2000 to 2009. I find significant inverse relationship between supervisory board size and firm performance. In addition, I find evidence of a significant nonmonotonic relationship, Tobin's Q and ROA first decline and then increase as the independence of supervisory board rises. The results are consistent with prior studies.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126289099","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-12-31DOI: 10.1007/978-3-642-31579-4_11
P. Engelen, Gerwin van der Laan, Annette van den Berg
{"title":"Board Diversity as a Shield During the Financial Crisis","authors":"P. Engelen, Gerwin van der Laan, Annette van den Berg","doi":"10.1007/978-3-642-31579-4_11","DOIUrl":"https://doi.org/10.1007/978-3-642-31579-4_11","url":null,"abstract":"","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115345520","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
To improve our understanding of the succession process we utilize a sample of 832 successions to examine firm and predecessor characteristics that influence the board’s choice of a successor’s functional and educational background. We find that outgoing CEO and firm characteristics influence the selection of successors’ functional backgrounds. Firms are more likely to hire new CEOs with functional backgrounds similar to the outgoing CEO. Research-oriented firms hire CEOs with the functional background that would permit them to understand the firm’s research processes. Firms with poor prior operating performance tend to hire successors with a financial/accounting background. Riskier firms are less likely to hire CEOs with a degree from an Ivy League institution. We also find that firms are more likely to change the functional background of the successor relative to the predecessor when there has been poor prior performance and the firm has higher institutional investor ownership. However, we do not find evidence that changing the functional background and/or the education level of the successor CEO improves firm performance.
{"title":"Successor CEO Functional and Education Background: Performance Antecedents and Consequences","authors":"Eahab Elsaid, B. Benson, W. Davidson","doi":"10.2139/ssrn.1845447","DOIUrl":"https://doi.org/10.2139/ssrn.1845447","url":null,"abstract":"To improve our understanding of the succession process we utilize a sample of 832 successions to examine firm and predecessor characteristics that influence the board’s choice of a successor’s functional and educational background. We find that outgoing CEO and firm characteristics influence the selection of successors’ functional backgrounds. Firms are more likely to hire new CEOs with functional backgrounds similar to the outgoing CEO. Research-oriented firms hire CEOs with the functional background that would permit them to understand the firm’s research processes. Firms with poor prior operating performance tend to hire successors with a financial/accounting background. Riskier firms are less likely to hire CEOs with a degree from an Ivy League institution. We also find that firms are more likely to change the functional background of the successor relative to the predecessor when there has been poor prior performance and the firm has higher institutional investor ownership. However, we do not find evidence that changing the functional background and/or the education level of the successor CEO improves firm performance.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131395693","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Banks failed in 2008 because individuals with knowledge of risks were not connected to individuals who had the incentive and power to take corrective action. Evidence of this problem is provided by reports from the Lehman liquidator and The US Government Financial Crisis Inquiry Commission. However, researchers have reported that financial firms more closely complied with what is considered “good governance” than industrial firms. This indicates that the current system of centralised control represents a systemic problem consistent with the insights of cybernetics. Cybernetics is defined as “the science of control and communication in the animal and the machine”. Cybernetic laws explain why the integrity of control and communications channels in complex systems is dependent upon “supplementation” with a requisite variety of co-regulators. Adoption of this insight would introduce “network governance” with cross checking channels within and between banks, their regulators, and stakeholders. Lawmakers and/or regulators can introduce network governance by requiring bank shareholders to amend their corporate constitution to introduce a division of power with checks and balances from stakeholders who can take on the role of supplementary and/or co-regulators. Such decentralized regulatory architecture is how simple creatures sustain their existence in complex, dynamic and unpredictable environments without suffering communication errors and/or data overload. The human brain illustrates network governance, as there is no chief executive neuron. A contribution of this paper is grounding the theory and practice of regulation and control in the science of governance. Cybernetic laws explain why regulators and large firms fail to reliably manage, regulate or govern complexity. Examples of large network governed firms provide evidence that no changes in existing laws are required to introduce network governance in the US, UK or Europe. The examples also provide evidence that network governance provides sustainable operating advantages over business cycles. This indicates how natural systems provide design criteria to enhance the efficacy and resilience of business operations, governance and regulation.
{"title":"Could the 2008 US Financial Crisis Be Avoided with Network Governance?","authors":"S. Turnbull, M. Pirson","doi":"10.2139/ssrn.1855982","DOIUrl":"https://doi.org/10.2139/ssrn.1855982","url":null,"abstract":"Banks failed in 2008 because individuals with knowledge of risks were not connected to individuals who had the incentive and power to take corrective action. Evidence of this problem is provided by reports from the Lehman liquidator and The US Government Financial Crisis Inquiry Commission. However, researchers have reported that financial firms more closely complied with what is considered “good governance” than industrial firms. This indicates that the current system of centralised control represents a systemic problem consistent with the insights of cybernetics. Cybernetics is defined as “the science of control and communication in the animal and the machine”. Cybernetic laws explain why the integrity of control and communications channels in complex systems is dependent upon “supplementation” with a requisite variety of co-regulators. Adoption of this insight would introduce “network governance” with cross checking channels within and between banks, their regulators, and stakeholders. Lawmakers and/or regulators can introduce network governance by requiring bank shareholders to amend their corporate constitution to introduce a division of power with checks and balances from stakeholders who can take on the role of supplementary and/or co-regulators. Such decentralized regulatory architecture is how simple creatures sustain their existence in complex, dynamic and unpredictable environments without suffering communication errors and/or data overload. The human brain illustrates network governance, as there is no chief executive neuron. A contribution of this paper is grounding the theory and practice of regulation and control in the science of governance. Cybernetic laws explain why regulators and large firms fail to reliably manage, regulate or govern complexity. Examples of large network governed firms provide evidence that no changes in existing laws are required to introduce network governance in the US, UK or Europe. The examples also provide evidence that network governance provides sustainable operating advantages over business cycles. This indicates how natural systems provide design criteria to enhance the efficacy and resilience of business operations, governance and regulation.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127780276","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Traditional antifraud theory presumes insider trading (IT) undermines financial market confidence expectations that investors play at a “fair game.” Losses sustained by shareholders ignorant of valuable secret, non-public information reveal a rigged game raising society’s capital costs. Public policy increasingly recognizes other harms: fiduciary breach incentives, subverted confidentiality, and injuries outside financial markets. Renewed IT interest compels reevaluation of justifications for IT’s restriction. The STOCK Act restricting Congressional IT and government intelligence consultancies converges with scrutiny of expert networks populated with academics into a generalizable understanding of insider hazards, thereby suggesting commonalities among all forms of insider threat.
{"title":"Academic Insider Trading","authors":"J. Bagby","doi":"10.2139/SSRN.2563243","DOIUrl":"https://doi.org/10.2139/SSRN.2563243","url":null,"abstract":"Traditional antifraud theory presumes insider trading (IT) undermines financial market confidence expectations that investors play at a “fair game.” Losses sustained by shareholders ignorant of valuable secret, non-public information reveal a rigged game raising society’s capital costs. Public policy increasingly recognizes other harms: fiduciary breach incentives, subverted confidentiality, and injuries outside financial markets. Renewed IT interest compels reevaluation of justifications for IT’s restriction. The STOCK Act restricting Congressional IT and government intelligence consultancies converges with scrutiny of expert networks populated with academics into a generalizable understanding of insider hazards, thereby suggesting commonalities among all forms of insider threat.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"103 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116453174","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using a unique dataset of board proposal voting by individual independent directors of public companies in China from 2004 to 2009, we analyze the effects of career concerns and current reputation stock on independent directors’ propensity to confront management. Younger directors and directors in their second (and last) terms, who have stronger outside career concerns, are more likely to be aligned with investors rather than the managers. Directors with higher reputation stocks (measured by mentions in news articles and the number of board seats) are also more likely to dissent. Their dissenting behavior is eventually rewarded in the market place in the form of more outside career opportunities and the avoidance of regulatory sanctions. Finally, we find that career concerns are significantly stronger among directors who already enjoy higher reputation.
{"title":"Reputation Concerns of Independent Directors: Evidence from Individual Director Voting","authors":"Wei Jiang, Hualin Wan, Shan Zhao","doi":"10.2139/ssrn.2023146","DOIUrl":"https://doi.org/10.2139/ssrn.2023146","url":null,"abstract":"Using a unique dataset of board proposal voting by individual independent directors of public companies in China from 2004 to 2009, we analyze the effects of career concerns and current reputation stock on independent directors’ propensity to confront management. Younger directors and directors in their second (and last) terms, who have stronger outside career concerns, are more likely to be aligned with investors rather than the managers. Directors with higher reputation stocks (measured by mentions in news articles and the number of board seats) are also more likely to dissent. Their dissenting behavior is eventually rewarded in the market place in the form of more outside career opportunities and the avoidance of regulatory sanctions. Finally, we find that career concerns are significantly stronger among directors who already enjoy higher reputation.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130269638","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using novel transaction-level data on Chinese business groups, this study provides the first direct evidence of the coinsurance theory of business groups by investigating when different types of internal resources are transferred within a business group. We find that in Chinese business groups, a credit crunch experienced by the controlling shareholding firm (the “controller”) of a publicly listed firm increases the loan-based related party transactions (RPTs) including loan guarantees and intercorporate loans provided by the listed firm to the controller. In turn, when the listed firm's performance dips, the controller and its son firms provide more support to the listed firm in the form of non-loan-based RPTs. These findings directly show the dynamic interactions of members within business groups. This paper was accepted by Bruno Cassiman, business strategy.
{"title":"Coinsurance within Business Groups: Evidence from Related Party Transactions in an Emerging Market","authors":"Nan Jia, Jing Shi, Yongxiang Wang","doi":"10.2139/ssrn.1985174","DOIUrl":"https://doi.org/10.2139/ssrn.1985174","url":null,"abstract":"Using novel transaction-level data on Chinese business groups, this study provides the first direct evidence of the coinsurance theory of business groups by investigating when different types of internal resources are transferred within a business group. We find that in Chinese business groups, a credit crunch experienced by the controlling shareholding firm (the “controller”) of a publicly listed firm increases the loan-based related party transactions (RPTs) including loan guarantees and intercorporate loans provided by the listed firm to the controller. In turn, when the listed firm's performance dips, the controller and its son firms provide more support to the listed firm in the form of non-loan-based RPTs. These findings directly show the dynamic interactions of members within business groups. This paper was accepted by Bruno Cassiman, business strategy.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126851369","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In their reply to our critique, Chhaochharia and Grinstein (2012) suggest that (i) Apple is a prime example of how board regulations affect CEO pay and should therefore not be excluded from the study, and (ii) their original results are robust to excluding the outliers when extending the pre-event sample period from 2000 to 2002 back to 1996. In this rejoinder, we (i) dispute that Apple is a fitting example to illustrate the causal effect of board independence on CEO pay, (ii) caution against drawing conclusions about the robustness of the results from the new regression results in the reply (e.g., due to lack of relevance, sample selection issues, and more outlier effects), and (iii) argue that important omissions in the reply cast further doubt on the conclusions advocated by CG. In a nutshell, the existing evidence simply does not support the view that mandated board independence helps rein in executive compensation.
{"title":"CEO Compensation and Board Structure – Rejoinder","authors":"Katherine Guthrie, J. Sokolowsky, K. Wan","doi":"10.2139/ssrn.2084630","DOIUrl":"https://doi.org/10.2139/ssrn.2084630","url":null,"abstract":"In their reply to our critique, Chhaochharia and Grinstein (2012) suggest that (i) Apple is a prime example of how board regulations affect CEO pay and should therefore not be excluded from the study, and (ii) their original results are robust to excluding the outliers when extending the pre-event sample period from 2000 to 2002 back to 1996. In this rejoinder, we (i) dispute that Apple is a fitting example to illustrate the causal effect of board independence on CEO pay, (ii) caution against drawing conclusions about the robustness of the results from the new regression results in the reply (e.g., due to lack of relevance, sample selection issues, and more outlier effects), and (iii) argue that important omissions in the reply cast further doubt on the conclusions advocated by CG. In a nutshell, the existing evidence simply does not support the view that mandated board independence helps rein in executive compensation.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131218716","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article aims to address some of the more conceptual questions about companies sitting behind two recent cases. Lord Scott in the House of Lords described Stone & Rolls as difficult but the facts in Stone & Rolls and Safeway could hardly be simpler. Stone & Rolls involved a claim by a fraudulent one-man company against its auditors for negligence for failing to detect its fraud. In Safeway a company was convicted of competition law breaches due to the actions of some of its employees and directors. The company was unsuccessful in an action against those directors and employees on the basis that the wrongdoing employees and directors were identified as the mind of the company and therefore exempt from liability. It is argued that the apparent complexities (and the occasional counter-intuitive outcomes) expose a fundamental misconception about the structure of companies. The first misapplication was brought about by the unwillingness in U.K. company law to acknowledge the place of the board in the company. The rules of attribution as set down by Lord Hoffmann in Meridian Global Funds and applied correctly necessarily mean that the board collectively and the shareholders collectively sit at the core of the company. When directors are acting collectively as part of the board, they are not the agents of the company. Their knowledge as part of the board is attributed to the company by the primary rules of attribution. Absent statutory provisions that override company law principles, or breach of duty, the board of directors collectively should therefore be immune from liability when they act in that role. But when accepting that the members of a board that acts collectively are, as a general principle, immune from liability, it is crucial to accept also that individuals who are directors are likely to have many different legal relationships with a company that in a temporal sense occur concurrently or sequentially. The second misapplication was of the special rules of attribution. For the purposes of a rule, usually statutory, the special rules of attribution can override the principles of company law meaning that the company can be primarily liable for the knowledge and actions of a corporate agent. Crucially though, and unlike, the doctrine of identification, the primary liability brought about by the special rules of attribution is only for the purposes of that statutory rule; it does not change the underlying structure of the company.
本文旨在解决最近两起案件背后的公司的一些概念性问题。英国上议院的斯科特勋爵(Lord Scott)形容滚石很难，但滚石和西夫韦的情况再简单不过了。滚石公司涉及一个欺诈性的一人公司对其审计人员的索赔，因为他们未能发现其欺诈行为。在西夫韦，一家公司因其部分员工和董事的行为而被判违反竞争法。公司在起诉这些董事和员工的诉讼中败诉，理由是这些不法行为的员工和董事被认定为公司的精神支柱，因此免于承担责任。有人认为，这种表面上的复杂性(以及偶尔出现的反直觉的结果)暴露了人们对公司结构的根本误解。第一个误用是由于英国公司法不愿意承认董事会在公司中的地位。霍夫曼勋爵(Lord Hoffmann)在子午线全球基金(Meridian Global Funds)中制定并正确应用的归因规则必然意味着，董事会和股东集体坐在公司的核心位置。当董事们作为董事会的一部分集体行动时，他们不是公司的代理人。他们作为董事会成员的知识根据归因的基本规则归于公司。如果没有凌驾于公司法原则之上的法律规定，或者没有违反职责的行为，那么董事会在担任这一角色时，应该集体免于承担责任。但是，在接受集体行动的董事会成员作为一般原则免于承担责任时，也必须承认，作为董事的个人可能与公司有许多不同的法律关系，这些关系在时间意义上是同时发生或顺序发生的。第二个误用是对特殊归因规则的误用。出于规则的目的，通常是法定的，特殊的归因规则可以凌驾于公司法的原则之上，这意味着公司可以对公司代理人的知情和行为负主要责任。关键的是，与认定原则不同的是，由特殊的归因规则所带来的主要责任仅为该法定规则的目的;它不会改变公司的基本结构。
{"title":"Conceptual Confusion: Organs, Agents and Identity in the English Courts","authors":"S. Watson","doi":"10.2139/ssrn.1910999","DOIUrl":"https://doi.org/10.2139/ssrn.1910999","url":null,"abstract":"This article aims to address some of the more conceptual questions about companies sitting behind two recent cases. Lord Scott in the House of Lords described Stone & Rolls as difficult but the facts in Stone & Rolls and Safeway could hardly be simpler. Stone & Rolls involved a claim by a fraudulent one-man company against its auditors for negligence for failing to detect its fraud. In Safeway a company was convicted of competition law breaches due to the actions of some of its employees and directors. The company was unsuccessful in an action against those directors and employees on the basis that the wrongdoing employees and directors were identified as the mind of the company and therefore exempt from liability. It is argued that the apparent complexities (and the occasional counter-intuitive outcomes) expose a fundamental misconception about the structure of companies. The first misapplication was brought about by the unwillingness in U.K. company law to acknowledge the place of the board in the company. The rules of attribution as set down by Lord Hoffmann in Meridian Global Funds and applied correctly necessarily mean that the board collectively and the shareholders collectively sit at the core of the company. When directors are acting collectively as part of the board, they are not the agents of the company. Their knowledge as part of the board is attributed to the company by the primary rules of attribution. Absent statutory provisions that override company law principles, or breach of duty, the board of directors collectively should therefore be immune from liability when they act in that role. But when accepting that the members of a board that acts collectively are, as a general principle, immune from liability, it is crucial to accept also that individuals who are directors are likely to have many different legal relationships with a company that in a temporal sense occur concurrently or sequentially. The second misapplication was of the special rules of attribution. For the purposes of a rule, usually statutory, the special rules of attribution can override the principles of company law meaning that the company can be primarily liable for the knowledge and actions of a corporate agent. Crucially though, and unlike, the doctrine of identification, the primary liability brought about by the special rules of attribution is only for the purposes of that statutory rule; it does not change the underlying structure of the company.","PeriodicalId":168140,"journal":{"name":"Corporate Governance: Internal Governance","volume":"524 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123573097","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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