People have been talking about corporate ‘culture’ and the extent to which directors get involved in managing the business of a company.  By ‘culture’, I understand the attitude of employees that affects the way that they and therefore the company do business.  If employees have an attitude that does not affect the way that they and the company do business – such as a distaste for people of a different sex, faith, or race – that attitude may not be of any interest to those who run the company.  But if an attitude does affect the way that they and the company do business, then it must be of interest to those who run the company.

The following propositions are basic.

First, the business of the company is to be managed by or under the direction of the directors.  (That statutory provision may be replaceable, but its effect can hardly be displaced.)

Second, the directors and employees of a company are bound to serve it in good faith, and to act in the best interests of the company, and they should avoid personal interests or other duties that conflict with their duty to act in the best interests of the company.

Third, if the company is advising a customer, or is otherwise in a position of trust with a customer, it will generally be subject to the same duties to its customer as its directors and employees owe to it – it must act in good faith and in the best interests of the customer and avoid interests or other duties that conflict with their duty to act in the best interests of the customer.

Those rules are clear.  Let us then take an example which is hardly hypothetical.  A company in the business of giving advice pays its employees at a rate that increases with the volume of advice that they give to customers of the company.  The employees do not disclose this to customers.  The personal interests of those employees then put the company in a position of conflict with its duty to act in the best interests of the customer.  This then is an issue in managing the business of the company that the directors must resolve.

It is absurd to question the role of directors in managing a company.  They are legally responsible for the management of that business.

Poet of the Month: W H Auden

In Memory of W B Yeats – Part II (February, 1939)

Earth, receive an honoured guest:

William Yeats is laid to rest.

Let the Irish vessel lie

Emptied of its poetry.

In the nightmare of the dark

All the dogs of Europe bark,

And the living nations wait,

Each sequestered in its hate;

Intellectual disgrace

Stares from every human face,

And the seas of pity lie

Locked and frozen in each eye.

Follow, poet, follow right

To the bottom of the night,

With your unconstrained voice

Still persuade us to rejoice;

With the farming of a verse

Make a vineyard of the curse,

Sing of human unsuccess

In a rapture of distress;

In the deserts of the heart

Let the healing fountain start,

In the prison of his days

Teach the free man how to praise.