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Company Law Reform Bill [Lords]

As I have said, we want, where possible, simply to restate the law in what we hope will be the 2006 Act. We do not seek to change the law, which would require not a consolidation measure but a new measure. I think that Members on both sides of the House would consider that substantially different. I am anxious to do as much as possible on the basis of consensus. What we are asking the House to accept—the incorporation of a large amount of earlier legislation into a new Bill to consolidate it—is unusual, but I hope that we shall be able to be as accommodating as possible. I repeat that such matters as the timetable are best dealt with through the usual channels. Let me return to the Bill. It has a number of broad themes, to which I shall return shortly. It deals with better regulation, shareholder engagement and a long-term investment culture, which is particularly important. It also provides for some flexibility in the future. At the heart of the Bill is a new approach to directors’ duties and what is known as narrative reporting. The Bill recognises that to achieve sustainable success for the benefit of shareholders, directors must have regard to a wide range of factors. For the first time, the Bill includes a statutory statement of directors’ general duties. It provides a code of conduct that sets out how directors are expected to behave. That enshrines in statute what the law review called ““enlightened shareholder value””. It recognises that directors will be more likely to achieve long-term sustainable success for the benefit of their shareholders if their companies pay attention to a wider range of matters, which are set out in clause 158. Directors will be required to promote the success of the company in the collective best interests of their shareholders, but in doing so they will have to have regard to a wider range of factors, including the interests of employees and the environment. That is extremely important. It has been recognised by successful companies for a long time, but the Government believe that it is important that all companies recognise their wider obligations. Under the Bill, they will have to have regard to those in reaching their decisions. That is a major step forward. I recognise that it is controversial. It was opposed in another place, certainly in the earlier stages, by the Conservatives, but I hope that, during the passage of the Bill, we can reach some unanimity on that matter because it is a major step forward in corporate governance.