Partner, Doctor of Laws Kari Lautjärvi has a new book “Corporate Benefit in Decision Making and Actions of the Company’s Management” coming up in March 2017. Feedback from board members, managing directors and chief legal counsels of major Finnish companies suggests that there is great demand for a book on this topic.
Q: Kari, What Made You Take Up This Subject?
The role of company’s management, in other words the board of directors and the managing director, is to carefully work in the best interests of the company at all times. The duties of care and loyalty are generally considered to protect the interests of the company and thus, indirectly, those of its shareholders. I previously addressed the issue of duty of loyalty owed by the management to the company’s creditors in my doctoral dissertation, published in February 2015. In this context, I discovered that, to date, no comprehensive research has taken place in Finland to determine the definition and object of such a duty or indeed of the concept of “company interest” that lies at its core. However, as our understanding of corporate governance and corporate social responsibility evolves, this matter is becoming increasingly topical and complex.
Q: Tell Us About Your Perspective in The Book?
This book examines the duty of loyalty placed on the company’s management and the concept of “company interest” central to it from various perspectives, and sets out guidelines for decision making in a variety of scenarios involving the distribution and use of company funds. Company interest is interpreted in close relation to the profit-making objective and going concern of the company’s activities as well as the business reason underlying a given decision or action. It considers, on the one hand, what the members of the company’s management should do and, on the other hand, what they are allowed to do, as they seek to promote the interests of their company and its shareholders. In this context, the extent to which company’s management must also consider the interests of other stakeholders in its decision making remains the key question. Modern corporate governance places a greater focus also on corporate social responsibility. The company’s stakeholders and wider operating environment are increasingly relevant to determining what constitutes the most appropriate approach to ensuring the company’s long-term profitability. The purpose of a company to generate profit can be considered a normative goal that sets an objective for the management but it does not determine the means for achieving it. In order to promote the interests of the company, the management must develop the company’s business and thus ensure its long-term viability in accordance with the principle of sustainable development and in line with all aspects of its corporate social responsibility commitment.