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Company Law Reform Bill [HL]

My Lords, Clause 876 confers a power on the Secretary of State and the Treasury to make regulations requiring certain categories of institutional investor to provide information about the exercise or non-exercise of their voting rights. I am pleased that we have reached agreement—confirmed by the noble Lord, Lord Hodgson, on Report—on the important principle underpinning this clause. Beneficiaries and clients are entitled to know what is being done with the shares that they beneficially own. Disclosure of voting information is an important part of the transparency of the exercise of corporate governance functions. I would have thought that the Liberal Democrat Party in its noble traditions of supporting democracy and transparency would also agree to that simple proposition. We are also in agreement that the increasing disclosures by institutional investors, either to their clients directly or more publicly—for example, as the noble Lord, Lord Hodgson, noted, the recent decisions by Fidelity Standard Life Investments and Newton Investment Management to disclose voting—are a positive change. We agree that the voluntary approach to disclosures by institutional investors should be allowed to evolve further before any consideration is given of implementing a mandatory disclosure regime. The idea that because we have back-up powers, but are allowing a voluntary approach that will somehow produce a wonderful thing called ““planning blight””, seems to be one of the more far-fetched arguments that has been produced in this House, which has not as a whole produced fanciful arguments. However, I must say that the argument of ““planning blight”” is somewhat fanciful. One suggested point of disagreement raised on Report was the extent of disclosure: should it just be to the beneficiaries, or to some wider class, or to the public at large? The clause does not prescribe that a particular approach must be adopted. It leaves the options open. That approach seems the best at this early stage. It cannot be that there is a great matter of principle; clearly if one divulges how one votes to a wide range of shareholders, it will be public information anyway. It may be that doing so publicly on a public website is the quickest way to give out the information. So I cannot believe that that is a serious issue. As I emphasised on Report, the choice with this clause is not between the voluntary and mandatory approaches but whether the Government should have effective backup in the event that the voluntary approach does not deliver or should have no lever to address the problem. On that point we appear to differ. The taking of power is intended to underpin the good progress being made voluntarily, not undermine it as some noble Lords seem to fear. The taking of power makes it clear that the Government value increasing levels of disclosure. By taking a power now, rather than creating a mandatory regime in the Bill, it also shows that the Government are willing to see how market practice evolves before choosing whether and how to exercise the power. I simply do not accept that taking the power has the negative consequences that noble Lords suggest. I have no hesitation in repeating the assurances that we have given, because they are important safeguards, not to be made light of. The Government will consult extensively before taking the power and it will be subject to a rigorous cost-benefit analysis. Those factors, combined with further scrutiny in both Houses, will ensure that any use of the powers will be proportionate. I return to our common ground. If noble Lords believe that we are right to encourage the voluntary approach, they should support the taking of a power that will serve to underpin that good progress.