Volume 1 issue 1 April 2013

How ‘Fred the Shred’ Got Away With It: Loud Calls for Company Law Reform

Philip Ashton
The article takes a critical review of s 172 (1) of the Companies Act 2006 in light of the financial crisis, noting the provision’s lack of use and inability to respond to executive failures. The decisions taken by Fred Goodwin whilst at the helm of RBS are scrutinised against the legislation, leading the author to conclude that the section is a right without a remedy. However, the example portrays an overarching powerful message of the ineptness of company law in modern corporate governance. In response to regulatory gaps, the qualification of decisions taken by directors that invariably effect the wider populous is necessary to prevent another crisis. Therefore, the philosophical lineage of the section must be questioned and the shareholder and stakeholder dichotomy must be resolved once and for all. Only by utilising comparative jurisdictional tests can the lacuna in corporate governance be filled.