The neoliberal (il)legitimacy of the duty of loyalty

Abstract

The reformulated duty of loyalty now found in s 172 of the Companies Act 2006 has been seen as imprecise or an ambiguous development for directors’ duties. It has generated debate about what is the best reading of the duty, the most fundamental aspect of which is whether this behavioural standard obliges a narrow focus on financial capital or a broader notion of well-being and inclusiveness amongst nonshareholder interests. This article argues that the law as a privileged and constitutive way of society-making can only be understood within a broader conceptual framework rather than the more traditional expository analysis of law. The context in which such an analysis takes place is that of the anti-collectivist, marketbased political project of neoliberalsm. When viewed through this explanatory lens, we see very clearly that English legal doctrine codifies an embedded relationship between managers and shareholders. In doing so, the article shows that the extraction of private benefits of control by shareholders is not an inevitable occurrence, but a decades-long, human-created and contingent phenomenon. While non-shareholder interests are introduced into the duty, this precatory element is merely a potential source of legitimacy to the ideology of the company as a private, exclusively shareholder-oriented enterprise.