When companies put shareholders second
By Michael Skapinker
Malcolm Glazer's proposed bid for Manchester United has caused uproar. About 500 of the football club's fans this month stormed the offices of NM
Rothschild, the investment bank representing Mr Glazer.
The Independent Manchester United Supporters' Association is collecting the
names of fans prepared to boycott the club's sponsors in the event of a
takeover by Mr Glazer. Manchester United's directors have already turned down one bid from Mr Glazer on the grounds that it would have loaded the club with too much debt.
But the board has now opened its books to Mr Glazer to allow him to carry
out due diligence in preparation for a new £800m. bid that is believed to be
less reliant on debt.
Whatever the structure of Mr Glazer's offer, the club's board could still
decline to recommend it. The objections of the fans, the club's customers,
would probably be sufficient grounds.
Many people would be surprised by this. They believe that a company board's
duty is to serve the interests of the shareholders. It is not. The board's duty is to act in the best interests of the company. Many people see little difference between the two and Farrar's Company Law concedes that "traditionally, this obligation to act bona fide in the interests of the company has been defined as an obligation to act in the interests of shareholders".
But that does not mean the directors have to compromise what they see as the company's long-term prospects. Farrar's adds: "It is the directors'
subjective opinion as to the interests of the corporators as a general body,
balancing the short-term interests of the present members against the
long-term interests of future members, which counts."