Introduction
In the corporate law context, a structure of entitlement rules defines the respective rights of shareholders and the various non shareholder corporate constituencies. These rules confer various powers or immunities on their beneficiaries. Some of these entitlement rules are rules of corporate law, others are not. An example of the former is shareholders’ statutory voting rights. Corporate law statutes confer voting rights on corporate shareholders as to a range of specified matters. The effect is to deny participation in control through the voting process to other actors within the corporate enterprise and to interested members of the general public. Statutes also limit shareholders’ liability to corporate creditors to their capital contributions, leaving creditors to bear the risk of corporate insolvency. Common law fiduciary duty doctrine likewise plays an important role in structuring the legal relationships among shareholders and non shareholders.[1] Management, having complied with the corporation’s contractual and other legal obligations, must then seek to maximize shareholder wealth, rather than, for example, seeking to share gains among shareholders and certain non shareholder constituencies. An example of entitlement rules that are not found within corporate law is the common law employment-at-will doctrine. This doctrine allows corporate management broad freedom to discharge employees whenever it is deemed to be in the shareholders’ financial interests to do so. All of these legal rules define important attributes of one’s status as a shareholder or non shareholder, and thereby structure the relationship among shareholders and non shareholders in important ways. [2]
The entitlements specifying the relations among shareholders and non shareholders are mostly default rules. They define rights that can be modified by contract. This point is familiar to corporate law commentators. Thus, for example, shareholders can agree to give up their limited liability and can also extend voting rights to groups other than common shareholders. Acting through corporate management, they can also agree to long-term employment contracts that override the at-will doctrine. Corporate law contractarians talk about the corporation as a product of consent by the various corporate constituencies to the terms of their contracts with each other. Thus, for example, if voting rights, limited liability, fiduciary duties, and the employment-at-will doctrine are, as default rules, merely terms of a standard-form contract, creditors or employees who do not bargain for their modification can be said to have agreed to these attributes of their relationship with the shareholders as part of their agreement to extend credit or to enter into an employment relationship. However, thinking about intra corporate relations in this way should not blind one to the fact that the bias of the default rule in question was not itself the result of a bargain between the parties. By providing default terms, corporate law and other legal doctrines determine the entitlement structure that will obtain unless that structure is altered by affirmative conduct. [3] Corporate law covers different aspects of a business and it makes sure that rules in the business will be followed well. The law is something used by not only by people in a state but it is implemented by people in an organization.
Laws are means for organizations to organize and restrict the actions of their employees; it is also used so that the organization will act according to its goal or objective. Laws prevent disunity and chaos in the organization. Without laws people in the organization will be encouraged to do things their own way and they will act on their individual beliefs. Without law the goals of the individual will the ones that will only be satisfied and this goal may be to serve one’s personal interest. The paper will discuss about the case about the company Romano LTD and the situation where different laws were used to solve a problem.
Facts of the case
The case is about the company Romano Ltd. This company sells antique replica furniture. The company wants to expand its operations by manufacturing country style timber floorings or by manufacturing Scottish tartan looking rugs and carpets. Before choosing what expansion path they will go to, the company underwent feasibility and marketability research on the two expansion paths. After the result of the research was completed the board decided to meet and talk about the expansion path they will choose. During the meeting one employee named was not keen on the choices for the company. That employee chose to do other things while the meeting is undergoing. At the end of the meeting had a speech in favor of the carpet and rugs project. The board agreed with her and it led to the board going for the Scottish tartan looking rugs and carpets project. The problem with that move is there was little research done regarding the rugs and carpet project. After some time left the company and worked for another company that employs her brother. used all the information she has from the previous company to start the country style timber floorings project for the new company.
Company
Companies are entities that engage in different businesses they believe that can provide them with opportunities for profits and opportunities for satisfying customer needs. Companies are those organizations formed for purposes of creating a product or providing service that can be offered to the general public. A Company’s main goal is to gain profit by providing a product and service that will be liked by the general public. A company has different kinds of ownership; it may be owned by one person or a single proprietorship, a company can also be a partnership, moreover a company can also be a corporation. Companies like a state have its laws that are derived as the company is formed. Companies have a structured organization that gives the employees ideas on their duties responsibilities and positions. It keeps the employees in line and it is a measure of the amount of salary they deserve. There are different positions in a company; one position in the company is a director.
Directors
Directors are individuals that manage the company. The directors make sure that the overall day to day activities of the company is followed. They provide direction for the company by guiding the employees in doing the best for the company. Directors are included in the group that provides a link to management and the employees. Together with managers and supervisors they are the ones used by the management as a bridge with the employees.
Duties of Directors
The law has traditionally imposed fiduciary duties on directors on the basis of the conventional model of the corporate structure in which the directors manage the company. It may be more in line with the typical present-day management structure of larger companies to say that senior managers, not all of whom are directors, manage the company whilst the board, comprising some senior managers and some non-executive directors who are not involved in the daily operations, devises strategy, decides upon major transactions and supervises management. Where senior managers run the daily operations of a company under the supervision of the board, the relationship between them and the company may be one of trust and confidence giving rise to fiduciary duties. The fiduciary duties of senior managers who are not directors have not been litigated to the same extent as the fiduciary duties of directors, although it has been recognized in a number of cases that senior managers of companies can owe fiduciary duties. [4] Directors have various purposes depending on their role in the company. The duties of directors are given to them so that they can provide the proper service to a company.
Employees
Employees are the members of the organization that act on making sure that the company provides the best product to its clients. They are the ones responsible for providing service to clients. Directors, Managers and Supervisors are the ones that decide on the strategy to use so that customer satisfaction can be given while Employees are the ones that make sure that customer satisfaction is felt by the clients.
Duties of employees
One aspect of employer rights is the power of the employer to make unilateral business related decisions that affect employees. This right can be summarized under the heading of entrepreneurial control. Another aspect of employer rights involves the duties owed by the employee to the employer. In addition to some of the special duties of an employee, there are a number of identified general duties owed by all employees. An employee owes a number of duties to the employer as his or her side of the employment contract. These duties may be implied, written or in most cases expressed, but most of them are implied by courts and arbitrators because there is no written contract. If the employee breaches the obligations, the employer may have just cause to take adverse personnel action or other actions against the employee.[5] Where the employer has just cause for the personnel action, the just cause reason will be a valid defense in either an at will or in a fixed term contract discharge dispute. The different implied terms to the employment contract apply to both individual contracts and collective bargaining contracts of employment. They are another example of an area where individual and collective contracts share many common characteristics. These implied duties are an obligation on the employee and a benefit to the employer. In other words, the employer has a right to insist on them without having to negotiate. This gives them the characteristic of an employer right. [6]
Viewed as a matter of contractual mutuality, there is no similar length list of implied duties that is commonly owed by the employer to the employee. This again makes the essentially one sided employee duties look like fundamental employer rights. The employee’s general duties may add little to the employer rights where the employer already has the authority to arbitrarily discharge the employee, as under an at will contract. However, where the employer seeks to justify a discharge on the basis of cause, both the general duties owed to the employer and the special characteristics of the job should be given close scrutiny. One of the most basic of the general duties is regular attendance at the workplace. Equally basic is the obligation that the employee performs the assigned tasks. The employee should arrive at work on time, not be tardy and properly perform.[7]
These employee duties complement the employer’s rights to make decisions on product choice, promotion of the product, and economic profitability mentioned earlier. A tardy or absent employee interferes with productivity. The general rule on absences is such that even if an absent employee takes employer approved absences, the employee has still been held subject to discharge. Clearly, unearned absences can result in discharge. Stealing from the employer is obviously a major offense. Fights among the employees cannot be tolerated, but exceptions may be made for moments of isolated anger.[8]
Following orders given by the employer is a basic requirement. Where an assignment or procedure is not carried out, the employee may be under an obligation to report that fact to the employer and to report the reason why it was not carried out. A plaintiff employee who was discharged for not following orders may have had an honest belief in the validity of the employee’s reasons for disobeying, but that belief will not aid the employee. The employee may believe that a work order is foolish, but that belief will not help the disobedient employee either. The employee is under a general duty to first obey orders and later grieve the matter, if a grievance mechanism is available. The self-help technique of refusal is a dangerous decision. [9] The duties of an employee states that he/she should have absolute loyalty to his/her employer. In the case violated this duty after going to the other company and divulging important information to the new company.
State the issue of Question 1A
The first question is looking for the duties that have been breached by under the corporation’s act 2001 and at common law.
State the law
Section 180
Section 180 of the Corporation’s act 2001 states that a director or other officer of an corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of an corporation in the corporation’s circumstance and occupied the office held by and had the same responsibilities within the corporation as the director or officer.
Section 181
Section 181 states that that a director or other officer of an corporation must exercise their powers and discharge their duties in good faith in the best interests interest of the corporation and for a proper purpose.
Section 182
Section 182 states that a director, secretary, other officer or employee of a corporation must not improperly use their position to gain an advantage for themselves or someone else or cause detriment to the corporation.
Section 183
Section 183 states that a person who obtains information because they are or have been a director or other officer or employee of a corporation must not improperly use the information to gain advantage for themselves or someone else or cause detriment to the corporation.
Section 184
Section 184 states that a director or other officer of a corporation commits an offense if they are reckless or are intentionally dishonest and fail to exercise their powers and discharge their duties in good faith in the best interests of the corporation or for a proper purpose.
Section 185
Section 185 states that Sections 180 to 184 have effect in addition to and not it derogation of any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation and do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to the first paragraph of this section.
Application
violated section 184 of Corporations act. The said act stated that any official or employee of an organization should take care of any information and position given to them. The said act mentioned that a person who is reckless and intentionally dishonest will be charged criminally for his/her actions. The said act stated that directors, officers or employees of a corporation must not fail to exercise their powers or discharge their duties in good faith and for a proper purpose. Even if a person is not anymore an employee of the company section 184 mentioned that the person must not use the information dishonestly. It stated that people previously employed by a corporation must not use the information they have to gain advantage for themselves or other people and they must not use any results of their action for the benefit of themselves and others and for an advantage or disadvantage to their former company.
had used the information she already has for her new company to prosper and create a better position in its industry. The actions by not only benefited her and the new company but it created disadvantage to the former corporation. The trust imparted to while she was working with the old company was violated and her action does not show good faith. was also reckless in divulging important information that the corporation entrusted to her. The offenses of were criminal in nature and deserve the proper kind of punishment. The actions of were unethical and should be seen by the new company as something she might do to them.
State the issue of Question 1b
Question 1b stated that a number of shareholders are threatening to initiate a statutory derivative action against the board of directors of Romano Ltd for failing to proceed with the timber flooring project. This part intends to discover whether or not the shareholders can pursue their threat.
State the law
The corporate law economic reform program act 1999 had a introduced about statutory derivative action. It mentioned that a statutory derivative action enables an individual shareholder to bring an action on behalf of a company for a wrong done to a company, where the company is unable or unwilling to bring the action itself.
Application
As mentioned by the corporate law economic reform program act 1999’s definition of statutory derivative action, the shareholders have all the right to a statutory derivative action against the board of directors of Romano Ltd for failing to proceed with the timber flooring project. As a way to protect the interest of the company the shareholders have the right to initiate that kind of action.
Conclusion
The duties of an employee states that he/she should have absolute loyalty to his/her employer. In the case violated this duty after going to the other company and divulging important information to the new company. Corporate law covers different aspects of a business and it makes sure that rules in the business will be followed well. had used the information she already has for her new company to prosper and create a better position in its industry. The actions by not only benefited her and the new company but it created disadvantage to the former corporation.
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