Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. This chapter is the first of two chapters addressing the duties of loyalty and good faith. These duties fall into two categories: those concerned with the way in which directors exercise the powers and discretions vested in them, and those concerned with the standard of conduct expected from directors. This chapter will focus on the first category, which includes the duty to act bona fide in the best interests of the company and for proper purposes, its counterpart in s 181 of the Corporations Act, and the limitations on directors not to fetter the future exercise of their discretions.

This chapter starts with a discussion of the general law in relation to the duty to act bona fide in the best interests of the company and for proper purposes. The discussion examines how the law developed historically and how it exists today. It then considers s 181 of the Corporations Act, before moving to consider alternative approaches to this area of law, which demonstrate a development of the stakeholder approach to corporate theory.

Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. Chapter 10 provided an overview of the duties as a whole, and Chapter 11 provided the history and current law in relation to the duties of care and skill. This chapter is the first of two chapters addressing the duties of loyalty and good faith. These duties fall into two categories: those concerned with the way in which directors exercise the powers and discretions vested in them, and those concerned with the standard of conduct expected from directors.

I argue that none of the current explanations of why shareholders should be given voting powers are persuasive. I then explain the exercise of informal power through the exertion of influence.

I argue that none of the current explanations of why shareholders should be given voting powers are persuasive. I then explain the exercise of informal power through the exertion of influence.

I argue that (i) the general meeting is a co-agent of the company and (ii) the company's interests should refer to the long-term value and viability of the company from a normative, legal and empirical perspective.