The Duty to Act in the Interests of the Company : Simply a Duty to Increase Shareholder Wealth?

Since the company has been given the status of a separate legal entity there has been a remarkable change in the role of companies. Companies have gone from small organisations to enormous multinational enterprises. Companies, particularly large public companies, exercise an enormous influence both economically and socially. Their actions affect not only direct stakeholders of the company such as employees, creditors and customers but also governments, communities and the environment. They employ millions of people and exercise significant control over public service sectors such as telecommunications and food production. Despite the significant impact companies have on society, there is no agreement, between academics or law makers as to what their objective or purpose should be. Is the function of companies simply to increase shareholder wealth or do companies have a wider responsibility to benefit stakeholders and society in general? This debate regarding the corporate objective is inextricably linked to the duties of directors. Directors, as managers of the company, are charged with the day to day decision making in a company. The legal requirements placed on directors, and how directors choose to respond to these legal duties, is the primary factor in determining what a company's objective will be