s.172(1) of the Companies Act 2006 requires that, in carrying out their duty to promote the
success of the company, directors must have regard to the interests of a wide variety of
stakeholders [1] (sometimes referred to as “constituencies”) listed in s.172(1)(a) – (f).
Locate and read s.172(1). Make a list of all the stakeholders whose interests the directors
must have regard to and submit below. For each of these stakeholders, consider the ways
in which they may have an interest in the company.
[1] a stakeholder is simply a person with an interest or concern in something, especially a
business. Think about who connects with the company and who is affected by its success or
failure.
Members
Clearly, the members, as owners, have a stake in the success of the company, which
provides them with income in the form of dividends and capital growth in the form of
appreciation in the value of their shares – and if the company becomes insolvent, they are
very unlikely to get their money back. Therefore, they have interests in both the short term
and the long-term success of the company. Investors are now increasingly concerned about
the long-term sustainability of companies is which they have invested, and the
environmental, social and ethical impacts of the decisions made by investors. They also have
rights in relation to the governance of the company. CA s.172 mainly safeguards the primacy
of the shareholders, subject to an extent to the interests of other stakeholders.
Employees
The company provides them with jobs and income. Most employees will be provided with a
pension by their employer. They may also have other benefits such as health insurance or a
company car. Some companies provide share option schemes. The employees have certain
employment rights, e.g. not to be wrongfully or unfairly dismissed, discriminated against
etc. Even if a company is sold, the employees’ rights and employer’s obligations transfer
under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Clearly,
once a company is insolvent, the employees lose all of these rights and benefits. From the
point of view of the company, having regard to the interests of the employees helps to
promote the success of the company, ensuring the retention of high quality staff and
avoiding the difficulties of a disgruntled and demoralised workforce or high staff turnover.
Suppliers
All suppliers want customers and an economically successful and sustainable company will
be a valued customer, providing income for the supplier. Continuing custom will provide
success of the company, directors must have regard to the interests of a wide variety of
stakeholders [1] (sometimes referred to as “constituencies”) listed in s.172(1)(a) – (f).
Locate and read s.172(1). Make a list of all the stakeholders whose interests the directors
must have regard to and submit below. For each of these stakeholders, consider the ways
in which they may have an interest in the company.
[1] a stakeholder is simply a person with an interest or concern in something, especially a
business. Think about who connects with the company and who is affected by its success or
failure.
Members
Clearly, the members, as owners, have a stake in the success of the company, which
provides them with income in the form of dividends and capital growth in the form of
appreciation in the value of their shares – and if the company becomes insolvent, they are
very unlikely to get their money back. Therefore, they have interests in both the short term
and the long-term success of the company. Investors are now increasingly concerned about
the long-term sustainability of companies is which they have invested, and the
environmental, social and ethical impacts of the decisions made by investors. They also have
rights in relation to the governance of the company. CA s.172 mainly safeguards the primacy
of the shareholders, subject to an extent to the interests of other stakeholders.
Employees
The company provides them with jobs and income. Most employees will be provided with a
pension by their employer. They may also have other benefits such as health insurance or a
company car. Some companies provide share option schemes. The employees have certain
employment rights, e.g. not to be wrongfully or unfairly dismissed, discriminated against
etc. Even if a company is sold, the employees’ rights and employer’s obligations transfer
under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Clearly,
once a company is insolvent, the employees lose all of these rights and benefits. From the
point of view of the company, having regard to the interests of the employees helps to
promote the success of the company, ensuring the retention of high quality staff and
avoiding the difficulties of a disgruntled and demoralised workforce or high staff turnover.
Suppliers
All suppliers want customers and an economically successful and sustainable company will
be a valued customer, providing income for the supplier. Continuing custom will provide
