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Company Law Reform Bill [HL]

My noble friend Lord Lea of Crondall finished his observations by saying that one has to read the whole of Clause 156 in order to understand what is meant by ““enhanced shareholder value””. I agree with him about that. Indeed, that is the error, if I may say so, that the noble Lord, Lord Razzall, made on the last amendment when he suggested that Clause 156(1) has nothing to do with enhanced shareholder value. It has everything to do with enhanced shareholder value. Clause 156(3) tells one what the enhancement is, but without Clause 156(1) one does not know what the interests of the company are, that they are identified with the interests of the members. The point of the debate was whether the company should be regarded as the interests of the members viewed as a whole or as the interests of employees, local suppliers, the environment and so forth. It is an essential part of the Bill. It follows from that that the noble Lord, Lord Lea, is right to say that Clause 156(3) is very significant. I differ from him on whether it is necessary to do what Amendment No. 158 proposes. My view is that it is not. Clause 156 (3) already provides that:"““In fulfilling the duty imposed by this section, a director must (so far as reasonably practicable), have regard to””." It is not necessary to insert into Clause 156(1) a reference to the duty that is being imposed by Clause 156(3). The clauses are read together, and a director can be in no doubt that he has to do what Clause 156(3) requires. Amendment No. 162, seeks to remove the words ““so far as reasonably practicable”” because, as I understand, it, my noble friend is concerned that that might be a licence for directors to ignore the requirements of Clause 156(3). I hope I can reassure him that that is not the effect of those words. Although ““reasonably practicable”” is not the same as ““theoretically possible””—for example, the words recognise that there may be urgent cases where the level of consideration it would be practical to give to a particular factor might be very limited, or at least less than the consideration that could be given to it if more leisurely circumstances existed—it certainly means that it is hard to conceive of any situation where it would not be ““reasonably practicable”” for a director to give any regard at all to the matters listed in subsection (3). It certainly does not mean that the director can disregard the matters listed in subsection (3). That is absolutely not what is intended or is said in the clause. Having made the point about the importance of Clause 156(3)—with which I agree—I hope my noble friend will consider that we have struck the right balance by recognising that it cannot be an absolute duty in all circumstances and that ““so far as reasonably practicable”” is the right level. Directors do have to have regard to these matters, but only so far as reasonably practicable.