The duties of directors in the face of activism
Authors Nigel Boardman, Emily Raftos
Affiliations: Partner, Slaughter and May, London; Associate (M&A), Slaughter and May, London
Source: Journal of Corporate and Commercial Law & Practice, The, Volume 2 Issue 2, 2016, p. 1 – 23
In recent years, activism has become one of the most widely discussed topics in corporate governance. Much of this discussion centres on the manner in which target companies should respond to activists. Here, opinion is divided: some commentators consider that activists enhance value and that therefore they should be encouraged, while other commentators consider that activists enhance short-term value at the expense of long-term value and that therefore they should be discouraged. At the heart of this debate is an important question regarding the duties of directors: is it the duty of directors to promote the long-term interests of the company over the short-term interests of the company? This article will consider this question. It will be argued that, as a matter of English law, the answer is ‘no’: in discharging their duties, directors are required to consider the long-term interests of the company, but are not necessarily required to promote such interests over short-term interests.