35 U.N.S.W.L.J. 360 (2012)
Enlightened Shareholder Value in UK Company Law

handle is hein.journals/swales35 and id is 362 raw text is: UNSW Law Journal

ENLIGHTENED SHAREHOLDER VALUE
IN UK COMPANY LAW
RICHARD WILLIAMS*
I INTRODUCTION: ENLIGHTENED SHAREHOLDER VALUE
AND SECTION 172 OF COMPANIES ACT 2006
The economic difficulties that have beset Western economies since the
financial crisis of 2008-09 have prompted policy-makers in many countries to
place an increasing emphasis on the need to foster a long term perspective in
business decisions.' This narrative has sparked renewed interest in the
'enlightened shareholder value' provisions in section 172 of the United Kingdom
('UK') Companies Act 2006 (UK) ('Companies Act'), which requires directors to
have regard to a range of interests in discharging their duty to promote the
success of their company.'2
Section 172 of the Companies Act enshrines the principle of enlightened
shareholder value ('ESV') into UK company law by appending to the directors'
duty to 'promote the success of the company for the benefit of its members as a
whole' a list of matters to which directors are required to 'have regard' in
discharging the duty. The ESV principles in section 172 are stated with a high
degree of generality and, as such, read very much like a list of exhortations to
'good' conduct by directors rather than specific instructions to undertake, or
refrain from undertaking, any particular actions. Nonetheless, section 171(1)(a)-
Lecturer in Law, Homerton College, University of Cambridge. I am grateful for the comments of the
UISW Law Journal s anonymous referees in compiling this paper. Responsibility for any errors in the
paper remains, however, entirely my own.
1    In the UK, for example, the current Prime Minister and Leader of the Opposition have promoted,
respectively 'moral capitalism' and 'responsible capitalism'. See, eg, 'Cameron's Moral Capitalism
Vision, The Guardian (online), 19 January 2012 <http://www.guardian.co.uk/uk/feedarticle/10048672>;
'Ed Miliband's Speech on Responsible Capitalism', UK Labour Party, 19 January 2012
<http://www.labour.org.uk/ed-miliband-on-responsible-capitalism,2012-01-19>.
2    See, eg, Jingchen Zhao, 'Promoting More Socially Responsible Corporations through UK Company Law
after the 2008 Financial Crisis: The Turning of the Crisis Compass' (2011) 22 International Company
and Commercial Law Review 275, 283; Virginia Harper Ho, 'Enlightened Shareholder Value:
Corporate Governance Beyond the Shareholder-Stakeholder Divide' (2010) 36 Journal of Corporation
Law 61. See also Andrew Keay, 'Risk, Shareholder Pressure and Short-Termism in Financial Institutions:
Does Enlightened Shareholder Value Offer a Panacea?' (2011) 5 Law and Financial Markets Review 435,
though Keay argues that enlightened shareholder value is unlikely to prove useful in combating short-
termism by boards of financial companies.

360

Volume 35(1)

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