The management of directors' conflicts of interest: a question of public interest?

This thesis is a study of directors’ conflicts of interest and the question of public interest. It examines whether directors’ conflicts of interest are regulated or managed in the public interest and if so, investigates the articulation of public interest in this regulation. The study is an illustration of whether companies can or should be managed in the public interest and what such public interest means and if it can be modified to better serve wider societal needs.
After providing an introduction to the study in Chapter 1, Chapter 2 provides a background to the study as it focuses on theories of the firm to draw out possible public interest rationales for the existence of companies. Chapter 3 focuses on defining the public interest, highlighting the challenges to definition, some theories on the public interest, and their strengths and weaknesses. This chapter associates key public interest theories espoused by Virgina Held with corporate governance theories or theories of the firm to illustrate that public interest is not necessarily alien to corporate governance. The thesis also explores the definition, theories and typologies of conflicts of interest. This is documented in Chapters 4. This chapter sets out the challenges of defining conflicts of interest, the various barriers to comprehending and addressing them. Chapter 5 explores the development of companies from the 16th to the 18th centuries. It looks at the development of companies to draw out public interest rationales for regulation. It explores the dual ordering of companies; private and public ordering which played an important part in the development of British companies from the era of the South Sea bubble to the advent of limited liability. Chapter 6 considers the notion, breach of trust and the fiduciary principles which have played an essential role in the development of the regulation or management of directors’ duties, particularly the duty of loyalty which is often associated with the regulation of directors’ conflicts of interest. One of the aims of the chapter is to ascertain whether the development of the use of breach of trust to address directors’ conflicts of interest was influenced by the need to protect societal interests in companies. Chapter 7 explores contemporary regulation of directors’ conflicts of interest and the question of public interest. It shows that although public interest has evolved significantly since the South Sea Company era. It remains a motivation which has played a part in the regulation of companies, including directors’ conflicts of interest. Chapter 8 completes the thesis with a series of concluding remarks and recommendations for future research.
The main findings for this study are that there are public interest considerations for the management of companies and good governance. Being that public interest is synonymous with phrases such as ‘general welfare’ or ‘the common good’ or ‘common interest’, it is unsurprising that public interest has played and continues to play a role in the regulation of companies, as illustrated through the exploration of directors’ conflicts of interest. Public interest is a nebulous concept which has evolved with societal needs and expectations of companies. Although private interests and shareholder-centric values have been given priority in contemporary regulation of companies, this does not have to be the case. It is asserted that the nature of public interest means that it is sufficiently flexible to encompass wider societal and social interests in the regulation of directors’ conflicts and management of companies generally.