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Company Law Reform Bill [HL]

Before the noble Lord, Lord Freeman, withdraws the amendment, having listened to the Attorney-General perhaps I may raise two points about which I am still puzzled. First, I worry that what is coming across on this clause is a failure to realise how, in practical terms, companies—and, in particular, listed companies—actually work. The Attorney-General said that the success of the company is whatever the members of the company define to be the strategy that leads to success. Those of us who have been involved in public companies would not regard that as a definition of the way in which the duties and responsibilities of directors are formulated in relation to the company. When my noble friend Lord Sharman sits as the chairman of Aegis, I do not think he particularly feels that he has been given an instruction by the shareholders of the company as to how to define the success of the company. So I worry, in general terms, about the approach of the Government. This leads me to my second point. Again using the example of Aegis, if the clause remains as it is, in considering his duties a director must act in the way that,"““would be most likely to promote the success of the company for the benefit of its members as a whole””." But there may be shareholders who simply do not agree as to what a director ought to do in order to promote the success of the company, so how would they fit into the definition of ““members as a whole””. Would it be simply by a majority vote of the shareholders at some meeting that might or might not be called? How would my noble friend Lord Sharman exercise his duties for the benefit of the members as a whole when he knows that a significant body of shareholders would not agree either with what he is proposing to do or with what the majority of members might propose to do? Indeed, he might not even know what the majority of his members would want him to do until he receives or does not receive a take-over offer from the shareholders. By insisting on going along this route rather than by the simpler codification of the existing common law principles reflected in the amendment, the Government are building-in serious complications for directors.