Holding disloyal directors to account: functional divergence in common law Asia

Directors’ duties of loyalty to the company have been diffused across the common law world and are a central tenet of corporate governance. Despite the apparent similarity of these duties, not much is known about how and why the duty diverges in its effectiveness across countries. Our study sheds light on the phenomenon by drawing on a comprehensive ten-year database of hand-collected judicial decisions across five jurisdictions in common law Asia. We find that the unified simplicity of law on the books belies the individual, diverse pathways in functional application in each jurisdiction. We investigate the underlying reasons, including the differences in enforcement mechanisms across jurisdictions, functional substitutes, and contextual influences. Implications for regulatory enforcement are considered, including the potential for civil proceedings to facilitate public enforcement of directors’ duties of loyalty.