Andrew Keay, The Enlightened Shareholder Value Principle and Corporate Governance, Oxford: Routledge, 2012, 304 pp, hb £85.00.
| Published date | 01 September 2013 |
| Author | Daniel Attenborough |
| DOI | http://doi.org/10.1111/1468-2230.12043 |
| Date | 01 September 2013 |
Andrew Keay,The Enlightened Shareholder Value Principle and Corporate
Governance, Oxford: Routledge, 2012, 304 pp, hb £85.00.
The enlightened shareholder value (ESV) principle is one of the most con-
troversial and challenging manifestations of a protracted period of extensive
review of English company law, which began in 1998 and was completed in
2001. The remit of the Company Law Review (CLR), which was established
by the then UK government’s Department of Trade and Industry, was to
achieve a modern company law for a competitive economy by way of a
comprehensive and coherent review of the law and by setting an overall legal
architecture. The review and consultation process culminated in the enactment
in the United Kingdom of the Companies Act 2006 that became operative
on 1 October 2007 and 6 April 2008. ESV takes on most substance in section
172; this provision forms one of several partially codified duties that are
imposed on company directors in Chapter 2, in Part 10 of the Act. This new
principle relates to corporate governance by identifying how companies are
to be managed in the attainment of chosen organisational objectives. The CLR
articulated the principle as an obligation on directors to ‘achieve the success of
the company for the benefit of the shareholders by taking proper account of all
the relevant considerations for that purpose’ and this involves taking ‘a proper
balanced view of the short and long term; the need to sustain effective ongoing
relationships with employees, customers, suppliers and others’ as well as to
‘consider the impact of its operations on the community and the environment’
(CLR, Modern Company Law for a Competitive Economy: Developing the Framework
(2000) para 2.11).
The ESV principle has sometimes, somewhat simplistically, been viewed as
a compromise between two conflicting ideas on the subject of preferential
corporate conduct which have, for the most part, dominated Anglo-American
classical intellectual discourse since the 1930s: namely the shareholder value (or
exclusivity) and stakeholder theories. The former puts shareholders at centre
stage: chosen corporate objectives are to be worked towards primarily for the
economic benefit of shareholders. The latter, by contrast, would give share-
holders no inevitable primacy, but would require the directors, when pursuing
a particular organisational objective, to balance the interests of all the relevant
stakeholder groups. English company law, however, has historically been sur-
prisingly ambivalent on the important question of management’s primary duty.
EMV purports to answer that question.
Naturally enough, legal academics and practitioners have spent much time
analysing and evaluating the principle and considering how it might operate in
practice. Over the past several decades, the topic of corporate governance has
become an increasingly high-profile aspect of legal and social-scientific scholar-
ship in both the common law world and continental Europe. Certainly, aca-
demic endeavour surrounding the scope, form and content of directors’ duties is
perhaps one of the oldest issues in company law and corporate governance. It is
also the issue that has proved most intractable. It is fair to suggest that ESV has
received a mixed reception. Focusing on these issues, the main objective of
Andrew Keay’s recently published book is to comprehensively elucidate and
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© 2013 The Authors. The Modern Law Review © 2013 The Modern Law Review Limited.
940 (2013) 76(5) MLR 935–948
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