The inclusion of employee representatives on corporate boards has gained popularity in many parts of the world as a means of protecting and promoting employees’ interest. This can be attributed to the proportional rise in the popularity of the enlightened shareholder value approach and the pluralist approach, respectively.
The amendment of the Companies Act to compel firms to include employee representatives on their boards has become topical. This may be interpreted as statutory intervention to compel companies to move from the traditional shareholder-orientated approach to either the enlightened shareholder value approach or a pluralist approach. It may also be understood as a desire to compel the diversification of corporate boards.
The effect of this is that representative directors owe identical fiduciary duties to the company as any other director. The types of common law fiduciary duties that are partially codified in section 76 of the act are:to exercise power for proper purpose;to avoid conflicts of interest. The duty to act in the best interests of the company may often overlap with the interests of organised labour in that both would want to see the company succeeding and remaining in business. Therefore, the representative director may be able to manage the tension in this regard. However, the duty to act with unfettered discretion or independent judgment is far more difficult to manage.