The relationship between social capital and the director's duty to promote the success of the company

Abstract

Purpose

The purpose of this paper is to explore the relationship between social capital and the directors' duty to promote the success of the company and to foster business relationships, which is a comparatively under‐researched issue.

Design/methodology/approach

The approach taken focuses on the concept of social capital, its various forms and influence on business performance. Ultimately, the paper explores ways in which directors' duties as stated in s.172 (1) of the Companies Act 2006 may affect the building and maintenance of forms of social capital.

Findings

It seems that it is likely that by complying with s.172 (1) directors will build forms of social capital, which in turn will enhance the business performance of companies in aspects such as innovative activity, transaction costs, and productivity. Consequently, the building of social capital is likely to promote the success of the company.

Originality/value

It can be stated that s.172 (1) CA 2006, is a potentially paradigmatic move in the way in which company directors undertake their business and view their company's stakeholders (Dignam and Lowry). Davies appears to agree with this view commenting upon the “ideological significance” of the introduction of s.172. It certainly seems that the inclusion of a duty to consider the importance of fostering business relationships implicitly promotes the pursuit of social capital.

Citation

Murphy, L. (2013), "The relationship between social capital and the director's duty to promote the success of the company", International Journal of Law and Management, Vol. 55 No. 2, pp. 86-102. https://doi.org/10.1108/17542431311308430