Abstract:
In March 2019, the Chief Executive of the Financial Markets Authority, New Zealand’s securities markets regulator, gave a widely publicised address in which he called for New Zealand’s main companies/corporations statute to be revised to remove shareholder primacy as its core philosophy. A key statement was: “[W]hether it is customers or employees, the environment or the communities in which they operate, I believe companies need to ask themselves what their purpose is and what their values are. And if it is purely to make money at the expense of everyone else they should not be allowed to operate.” This paper responds to the Chief Executive’s presentation, arguing that it was misguided. New Zealand’s company law, like that of most other countries, does not and has never required directors to profit maximise. There is also a wealth of existing legislation and more to come that aims to protect the interests of employees, customers, communities and the environment. It is true that New Zealand law, again like that of many other countries, does not ban profit maximisation, but it is argued that it is not sensible to do so. Doing so would not only raise intractable difficulties of enforcement and make directors potentially less accountable rather than more accountable, it would be an incoherent aim in highly competitive industries. The paper goes on to make some more particular points about justiciability, the inappropriateness of meddling with the content of a director’s fiduciary duty to act in the company’s best interests, and the notion of directors’ duties being owed to creditors after a company’s insolvency.