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Contractarians regard employees in terms of costs of production, and therefore for
the purpose of efficiency, these need to be minimized. 117 The stakeholder approach,
on the other hand, treats employees as assets that need to be preserved and
protected. 118 Common law has been reluctant to consider such an approach, despite
criticisms being made for such an unfriendly attitude towards employees. 119 It was
not until the UK Companies Act 1985 that employees‟ interests finally came into the
picture. Directors, when discharging their duty, were required under Section 309 to
consider the interests of employees, apart from shareholders' interests. 120
However, their duty remained to the company and only shareholders would have the
right of action against any wrongdoing committed by the directors. 121 Hence, despite
having their interests well written in the legislation, employees did not have the right
to enforce such provision unless they happened to own shares in the company.
Section 172(1)(b) of the Companies Act 2006 which replaces section 309(1) requires
a director to have regard to the interests of the employees in discharging his duty
under the Act. 122 The right to take action against directors who failed to adhere to
117 Milman above n111 at156.
118 Ibid.
119 Ibid.
120 Section 309(1) of the UK Companies Act 1985 provided “The matters to which the directors of the
company are to have regard in the performance of their function include the interests of the
company‟s employees in general, as well as the interests of its members.” See also section 132 of
the New Zealand Companies Act 1993.
121 Section 309(1) of the UK Companies Act 1985 provided “Accordingly, the duty imposed by this
section on the directors is owed by them to the company (and the company alone) and is
enforceable in the same way as any other fiduciary duty owed to a company by its directors.”
122 Section 172(1) of the UK Companies Act 2006 provides “A director of a company must act in the
way he considers, in good faith, would be most likely to promote the success of the company for the
benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company‟s employees,
(c) the need to foster the company‟s business relationships with suppliers, customers and others,
141