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This section denotes the responsibility of director to grow company for the benefits of its members at large and while doing so stress to act in good faith.The act seems to be reflection of common law obligations with a slightly changed concept of good faith combined with other compulsions.The legal side of directors’ remuneration appears to be sufficient with the directors’ duties legislation acting as an efficient preventative measure for the problems that directors’ remuneration creates.
In order to analyse the consequences of the two proposals the current law will be summarized so that an analysis of each can be advanced.
The essay will then examine other available options.
The Companies Act 2006 "CA 2006" deals with issues of companies working under the English jurisdiction and it has been enforced in different stages instead as a whole.
CA 2006 has superseded the Companies Act 1985 and now is main source for provision of rules on corporate governance.
The essay will conclude that neither of the proposals is appropriate in that the theoretical consequences outweigh the practical benefits, moreover, provisions already exist that if strengthened would provide more effective solutions. ...e UK would be impractical due to an entire overhaul of the current system being needed.
Current position Currently, directors have no prima facie entitlement to be remunerated for their work (Hutton v West Cork Railway Co 1883), but Article 23 of the Companies (Model Articles) Regulations 2008 establishes that it is for directors to decide the lev... Conclusion It is concluded that neither of the above proposals are adequate in that any practical benefit that results from the proposal such as employee and shareholder engagement are outweighed by the theoretical impact of increasing the overlap of the organs which would alter the structure of company law.The director is also obliged to take care of both promoting the success of the company and securing the benefits of its members in a wider perspective under S 172(1) a-f.Moreover, provision of the obligation that the director should also consider the possible long term outcomes of his actions, employees’ interest and also needs to improve the business provisions of the company with stakeholders makes CA2006 more significant.obligations narrated in this provision obligates require to act fairly between the members of the company and take into the consideration the impact of the company’s operation on the community and environment which is generally called Corporate Social Responsibility.Director is also obligated by this provision to take care of the reputation of the company and its standards CA 2006 not only brought a significant change in the common law concept of maximising the benefit and getting most out of the business and moved the concept in the direction of community and environment but also introduced the value of shareholders.A set of rules on the duties of directors is provided in part 10 chapters 2 of the act but the real significance of this Act is the provision of director’s duty in s.172(1), this obligate to directors promoting the success of the company considering the sections 1(a) to (f), likely long term consequences of his act, take care the interests of the employees of the company, improve the company’s relationship with other stakeholders such as suppliers, customers etc.This common law fiduciary obligation is now embodied in statute; S 172(1) of CA 2006 requiring the actions of a director for promoting company’s success and benefit of its members.The section also makes it compulsory for a director to act in good faith, behaving in a way which in thinks is compulsory for both success of the company and interest of its members.The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company.It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves.