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such provision, however, remains with shareholders. 123 The Malaysian Companies
Act 1965 empowers directors to establish and support various resources calculated to
be for the benefit of present and past employees and their dependents. 124 In light of
this, the Corporate Law Reform Committee (CLRC) viewed the existing provision as
sufficient to protect the interests of creditors. 125
In reality, employees are as vulnerable as shareholders for they will be affected by
the outcome of the company‟s operation. They may be subjected to redundancy,
unpaid wages, unfair dismissal, industrial accidents and other incidents. 126 Further,
employees cannot diversify their risks like shareholders who can do so by investing
in many companies.
Though some of the incidents are external factors out of the company‟s control, the
fact remains that employees are vulnerable. While shareholders can rely on law to
protect them, employees are not privy to such protection. Like creditors, employees
are expected to protect themselves through negotiation processes which are
incorporated in the terms of contracts. The principle used here is again freedom of
contract where both parties are free to bargain terms in their favour and to reach a
compromise. In reality, employees do not have the bargaining power to demand
(d) the impact of the company‟s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct,
and
(f) the need to act fairly as between members of the company."
123 See section 178(2) of the UK Companies Act 2006: “The duties in those sections (with the
exception of section 174 (duty to exercise reasonable care, skill and diligence) ) are, accordingly,
enforceable in the same way as any other fiduciary duty owed to a company by its directors.”
124 See para 7 of Third Schedule of the Malaysian Companies Act 1965.
125 Malaysia Company Law Reform Committee “A Consultative Document on Clarifying and
Reformulating the Directors‟ Role Duties, Corporate Law Reform Committee” (2006) at [4.7].
[CLRC Clarifying and Reformulating the Directors‟ Role Duties]
126 Cheffins above n8 at 91.
142