Does Directors Have Fiduciary Duties?

It is believed that Efficient Market Theory is based upon some fallacies and it does not provide strong grounds of whatever that it proposes. More importantly the Efficient Market theory is perceived to be too subjective in its definition and details and because of this it is close to impossible to accommodate this theory into a meaningful and explicit financial model that can actually assist investors in making the investment decisions (Andresso-O’Callaghan, B., 2007).

As Chapter 10 questions, if further evidence continues to surface that capital markets do not always behave in accordance with the efficient market hypothesis, then should we reject the research that has embraced the EMH as a fundamental assumption? In this regard we can return to earlier chapters of this book in which we emphasised that theories are abstractions of reality. Capital markets are made of individuals and as such it would not (or perhaps, should not) be surprising to find that the

Chapter seven: What does the efficient market theory have to do with Financial markets? Discuss the positives and negatives of the theory. Why do Wall-Street types not like it? Explain the coin flipping experiment, as it relates to investment diversification.

Chapter seven: What does the efficient market theory have to do with Financial markets? Discuss the positives and negatives of the theory. Why do Wall-Street types not like it? Explain the coin flipping experiment, as it relates to investment diversification.

It is essential that the role, duties and responsibilities of directors are clearly defined. The Combined Code (2006) states that “the board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed”.

In large corporations the success or failure of the company is the responsibility of the board of directors. According to Richard DeGeorge, “The members of the board are responsible to the shareholders for the selection of honest, effective managers, and especially for the selection for the CEO and of the president of the corporation.” (p. 202). The board members have a moral responsibility to ensure the corporation is run honestly, in respect to its major policies, and to ensure the interests of the shareholders are satisfied. The next responsibility within a corporation is the responsibility management has to its board of directors. DeGeorge writes, “It must inform the board of its actions, the decisions it makes or the decisions to be made, the financial condition of the firm, its successes and failures, and the like.” (p. 202). The management of the corporation is morally obligated to

This essay will aim to investigate the ethical treatment of shareholders and workers in a traditional, capitalist corporation; The Ford Motor Company and compare and contrast the findings with the treatment of these stakeholders in the Mondragon Cooperative Corporation. The structure of this essay will be as follows; firstly the fundamental differences between the two contrasting organisations will be examined and how these differences impact the ethical treatment of the relevant stakeholders; secondly, the ethical treatment of shareholders in regards to corporate governance and the executive’s accountability and control will be investigated, and lastly, the ethical treatment of workers within the two contrasting organisations will be

In the other meaning, fiduciary obligations cannot automatically be implied to constructive trustees and resulting trustees due to the trustees have not voluntarily taken the fiduciary obligations . However, there is an exception for the resulting trust where the trust arises because of a failure of an express trust, then the trustee would have regarded as a fiduciary and undertake the fiduciary obligations .

Firstly, a company is a separate legal entity[5]. Therefore, the debt of the company is separated from its directors and shareholders. In addition, the money borrowed will be recorded under the name of the company and the creditor will sue the company if there is any unpaid account. However, creditor is playing an important role in providing funds to assist company to manage its cashflow and expansions. Hence, it can be said that creditor is the stakeholder and can effect the action of the business. Nevertheless, according to the passage Re New World Alliance Pty Ltd (1994) 122 ALR 531 at 550,[6] there is not direct duty owed by the director and officer to the creditors because their duties are owed to the company. However, in the situation when the directors of company consider a high risk project or it is in a financial distress, the creditor has to occupy a weakness position. This is because, if the project fails, shareholder will lose nothing but the money they have invested due to the limited liability then the risk of filature will shift to the creditor. Hence, it seems unfair for creditor who has not fiduciary protection and whose right is limited by the contract. On the other hands,

Andrew, a director as defined by section 9 , was the Chief Financial Officer and also an Executive Director, so he owes legal responsibilities to Century Insurance Ltd under common law, fiduciary duties and statute law. These responsibilities include duties to exercise care, skill and diligence, to act in good faith and for a proper purpose, and to avoid conflicts of interest and disclosure. This essay will determine whether Andrew has breached fiduciary and statute duties when he prepared and signed off on the financial reports. This essay will also discuss possible defences and the potential legal responsibilities for Andrew as well as available remedies for Century Insurance Ltd.

This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees,

Last but not least important, an efficient capital market is one in which stock prices fully reflect all available information. However, the paradox is that since information is reflected in security prices quickly, knowing information when it is released does an investor little good. Furthermore, it is impossible to create a portfolio which would earn extraordinary risk adjusted return. As a consequence, all the technical and fundamental analysis are useless, no one can consistently outperform the market, and new

Conflicts between stockholders and creditors Conflict between shareholders and creditors is common for the company which use debt capital to form an optimum capital structure. As mentioned earlier, agency relation exist when one party works as an agent of the principal. In an organization management

This paper examines the role that financial reporting plays in the contracts that have the purpose to mitigate the gap between managers and shareholders and managers and debt holders. It also elaborates on the way that financial reports are used in debt and stewardship contracting. It also examines the advantages and disadvantages of conservatism and fair value accounting in the debt and stewardship contracts.

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.