DOES SHAREHOLDERS’ PARTICIPATORY POWER UNDERMINE THE BOARD AUTHORITY IN THE UK COMPANY LAW?

Abstract

The financial crisis of 2007-8 has focusedincreasing attention on the accountabilityof directors. Demands of greateraccountability has given further impetuson shareholder empowerment. However,inparticular, director primacy theoryfiercely advocates limiting shareholderpower because shareholder participationundermines the board authority to managecompany freely and forces the board to actin the interests of shareholders rather thanin the long-term interes ts of the company.The UK perspective has not enjoyed anysustained examination of the relationshipbetween shareholder power and the boardauthority.This paper examines the amendment ofarticles of association, shareholders’ reservepower, the appointment and removal ofdirectors, executive remuneration andtakeover regulations in the UK and theboard authority under UK case law, andargues that shareholder power does notundermine the authority of the board andthese two concepts are compatible witheach other.