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The Monitoring Duties of Directors Under The EC Directives: A View from the United States Experience Professor Jim Cox 2 Duke J. of Comp. & Int'l Law 29 (1992) (with Nis Jul Clausen). |
ABSTRACT:
The right of establishment and free movement of business and capital within the member states of the European Economic Community (EC) is considered one of the cornerstones of the Treaty Establishing the European Community (EEC Treaty). However, the laws that apply to the public limited company, the most important business association within the EC, vary widely among the member states. These differences inhibit the free movement of business and the right to establish companies, and, therefore, the EC recently has taken steps to harmonize company law among its members. Two highly controversial proposals are currently before the Council, the Fifth Company Law Directive (Fifth Directive) and the Thirteenth Directive on Company Law Concerning Takeovers and Other General Bids (Takeover Directive). Each of these proposed directives is examined here in terms of the importance they place on the role of outside directors. This article will illustrate that although both of these Directives embrace a monitoring role for company directors, neither clearly defines what that role should be. Part I of this article traces the evolution of outside directors' monitoring obligations in the United States. This insight permits conclusions to be drawn in Part II about the overall commitment which the Fifth Directive makes toward a meaningful monitoring role for directors. Part III presents a close analysis of the Takeover Directive's treatment of defensive maneuvers and concludes that the Directive has vast lacunae in this area. This article argues that, in light of the emphasis in the United States on the role of outside directors in takeovers, a similar emphasis appears to be an appropriate manner to deal with the Takeover Directive's incomplete treatment of defensive maneuvers by target management. Part IV offers conclusions drawn from the analysis concerning the overall benefits that can be derived from a comparative analysis of company and takeover law reform proposals that are presently before the EC. The authors conclude that the Takeover Directive leaves a wide area within which the directors may invoke a full panoply of defensive maneuvers. Although the Fifth Directive can be read as imposing duties on the directors similar to those that exist under United States fiduciary law, both the Fifth Directive and the Takeover Directive each raise as many questions as they answer because each, in its own manner, deals incompletely with the obligations of directors. If shareholder protection is to be effective within the EC, this article argues that the different roles to be played by executive and non-executive directors must be reflected and stressed in the Takeover Directive and must find further elaborations in the Fifth Directive, as well.
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