Assignment On
Legal Environment in Business Topic: Directors should have more power than the
shareholders
Prepared For
K. M. Shazzad Mohashin
Course Instructor
BUS 211 – Legal Environment in Business
Prepared By
Syeda Rifat Ara
ID – 1531
Batch – 21st
Institute of Business Administration
Jahangirnagar University
Date of Submission
28.12.2013
Directors should have more powers than shareholders
There’s a famous saying of Peter F. Drucker, “Whenever you see a successful business,
someone once made a courageous decision.” That’s what a company director does- making
courageous decisions for the betterment of the business, which ultimately results in
shareholder wealth maximization. The recent issue regarding giving shareholders more
power has divided scholars into two parts- shareholder primacists and director primacists.
The article entitled ‘Empowerment of Shareholders under the Companies Act’, written by
Mr. K. M. Shazzad Mohashin (Lecturer in Law at Jahangirnagar University), has been
written in support of the ‘Shareholder primacy’. Here, as a business student, I am going to
write in support of director primacy and show some logical arguments that support the fact
that directors should have more powers than shareholders.
In the Companies Acts “director” includes any person occupying the position of director,
by whatever name called.[1] In business, a company director is an appointed or elected
member of the board of directors of a company who, with other directors, has the
responsibility for determining and implementing the company’s policy.[2] A company
director does not necessarily have to be a shareholder of the company. Directors are
granted a wide range of management powers usually bestowed upon them by the
company’s articles of association. Directors are also usually employees of the company.
They have a duty to the company, to the shareholders as a whole, other employees and
often creditors of the company. Though the law does not provide a direct duty to creditors,
but under insolvency proceedings creditors’ interests are often relevant.
To form a company, it is required to have directors. Every public company and a private
company which is a subsidiary of a public company shall have at least three directors.[3]
They manage the business of the corporation. Major decisions of the company are taken by
them, the decisions which will ultimately maximize shareholder wealth. They take the
decisions about
– whether the company will enter into a valid contract or not
– borrowing and issuing security
– terms and conditions under which the company’s shares are issued, transferred and
