It is important to know that the officers of a company must consider
the interests of the shareholders first before giving credit to the
employees. This is highlighted in the case of Parke v Daily News Ltd (1962) Ch
927 Chancery Division.
Case Facts for Parke v Daily News Ltd (1962):
The directors of the Daily News Ltd realized that continuing the News
Chronicle and the Star publication will lead them to wind up the company.
With this, the managing director of the Daily News negotiated with
Associated Newspapers, Ltd to sell the two newspaper publications.
Daily News received $2 million and that employees will sill have their jobs
in the company. However, Associated Newspapers did not agree to include the
provision regarding the pensions and compensation of the employees and this
became an issue for the company.
Case Issue:
The issue of the case of Parke v Daily News Ltd (1962) is that Parke
lodged a complaint against the company and argued that the payment paid
to Daily News should be given to shareholders as the company
closes.
Decision of the Court:
The court ruled that the amount paid when the company was sold was to
be divided among the shareholders. The court did not agree that the
directors should use the money to pay the employees.
Case Significance
The significance of the case is that it may be agreeable that the
directors consider the interests of the employees; however, there are no
statutory laws supporting such argument.
It is stated that there can be considerations for the employees, but it
must be in line or must result to the benefit of the enterprise.