The Legal Control of Management Discretion

J. E. Parkinson

in Corporate Power and Responsibility

Published in print April 1995 | ISBN: 9780198259893
Published online March 2012 | e-ISBN: 9780191682018 | DOI:

Series: Clarendon Paperbacks

The Legal Control of Management Discretion

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This chapter explores the role of law in overcoming the problem through the imposition of legal duties which limit the purposes for which managerial discretion may legitimately be exercised. The relevant duty is the duty to act bona fide for the benefit of the company. The chapter also concentrates on the role and effectiveness of rule-based standards, and judicial monitoring of compliance with them, as a technique for shaping management behaviour. It also examines the way in which the law has defined the ends for which the directors must exercise their powers. It then addresses the effectiveness of the law as a control technique in holding directors to the ends so specified. In general, the duty to act in the interests of the company (i.e. the shareholders) imposes only a weak control on managerial discretion, since any plausible assertion that a course of action is designed to increase the company's financial well-being will be enough to protect it from attack. It follows that the duty cannot be expected to play a major part in controlling managerialist tendencies.

Keywords: legal control; management discretion; legal duties; company; judicial monitoring

Chapter.  13528 words. 

Subjects: Company and Commercial Law

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