Implied (Implicit) Limitations on Corporate Governance


The author examines the compliance of the legal nature of the company with the principle of social justice. The shareholder has priority in corporate governance by virtue of the economic and legal status. The interests of a participant (shareholder) are derived from the interests of a commercial organization. The goals of the company must take into account the interests of other stakeholders in modern conditions. The author proposes a tool of “implied limitations” which allows to include an element of social justice in managerial discretion.


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Arguments for Benefit of the Owner’s Priority in Company Management


The author proves priority in company management from the owner (the participant, the shareholder). The participant has managerial powers, including concerning the choice of economic strategy of business, owing to the economic and legal nature. The right of the owner makes changes to the charter confirms its priority in company management. In competence of the owner there is development of long-term incentive system of governing body (management and board of Directors). The owner can use model of «the expected damage» (interpretation of the agreement), for decrease in the risk connected with actions of management in private interests (self-dealing) in the conditions of the incomplete contract.

The Ambivalent Nature of Organs of Government of the Company

#9. Preserving humanness
The Ambivalent Nature of Organs of Government of the Company

The author considers features of functioning of organs of government (board of directors and management) in joint-stock company. It is possible to present company director not only in the form of organs which is born by fiduciary duties of due care before the company and its shareholders of the company, but also as agents who render services to shareholders. The author suggests to consider organs of government in two directions (as corporate organ which are allocated by powers and are a company integral part and as agents who render services to shareholders) as such review allows shareholders to expect the true purposes of a director and not to admit destruction of shareholder value.