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Directors will also enlist the service of expert opinion before deciding, and the time
taken in deliberating will increase the costs. 106 The rise in the agency costs is a
matter of concern to shareholders because the growth in costs does not coincide with
the degree of profit making. 107
It should be noted that monitoring is one of the most useful mechanisms in corporate
governance and can be used in order to improve the management as well as the
company‟s operations as a whole. 108 Monitoring would involve directors deliberating,
investigating, analysing, interpreting and reviewing every decision they make. 109
Directors will be able to identify any shortcomings and to ameliorate any weaknesses
identified. Consequently, it promotes good management ethics and all stakeholders
in the company will benefit. 110
6.3.2 Employees
Employees‟ interest was not mentioned in any earlier companies‟ legislation due to
various factors. Firstly, unlike shareholders who risked their investment, employees
were not seen as risk providers. 111 Since employees did not risk anything in the
business operation, they should not be allowed to claim the residual benefits from
such transactions. Secondly, they were perceived as having no legitimate interests in
106 Ibid, at 316.
107 Ibid.
108 Ibid.
109 Ibid.
110 Ibid.
111 David Milman “From Servant to Stakeholder: Protecting the Employee Interest in Company Law”
in David Feldman and Frank Meisel (Eds) Corporate and Commercial Law: Modern Development
(Lloyd‟s of London Press, London, 1996) 147 at 149.
139