SHAREHOLDER PRIMACY AND DIRECTORS' DUTIES: AN AUSTRALIAN PERSPECTIVE

An important debate in corporate governance concerns the validity of the shareholder primacy theory-a theory which depicts the role of company directors as primarily being to act in the interests of shareholders and maximise the wealth of shareholders. This article reports the results of a survey of Australian company directors that had, among its objectives, testing the validity of the shareholder primacy theory. Findings are presented on four questions: (i) Do directors prioritise the interests of shareholders above the interests of employees and other stakeholders? (ii) If so, does the source of that prioritisation lie in legal obligation or duty? (iii) Are directors in types of companies corresponding to the market/outsider model more inclined to prioritise shareholder interests? (iv) Does the prioritisation of shareholder interests tend to come at the expense of employees?