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Company Law Reform Bill [Lords]

Without any gritted teeth whatever, I am happy to agree with the right hon. Gentleman and to say that the development of that sort of consensus and leadership within business would be a welcome development, which we should encourage on both sides of the House. I want to focus on a concern that is peripheral to the Bill, but is likely, as we saw from earlier interventions on the Secretary of State, to prove an irritation as our debates on the legislation develop. The long-standing effort to achieve consensus has been largely successful, as illustrated by the Opposition’s response, but there is a risk of our debate being hijacked by a mistaken attempt by the Trade Justice Movement to introduce an inappropriate burden on directors of companies registered in the UK. As I have told people in that movement, of which I have long been a part, I am particularly sad about that. If we were to place in company law a burden in respect of environmental and social issues, when the Bill is about the vehicle of the company rather than the activities of companies, it would have two effects. First, large international companies, which see Britain as a good place to be located and to do business—in an environment, incidentally, where good business practice and responsibility on environmental and social issues is encouraged—will move to Paris, New York or Tokyo. The burden of the legislation would then fall on small and medium-sized businesses, which generally do not have that choice. Secondly, accountability will be diminished rather than increased. The Bill is clearly focused on the vehicle—the company—and how to simplify and make more effective accountability to shareholders. That is what enlightened shareholder value is all about. The Bill makes it clear that directors have to consider the interests of employees and the environment in carrying out their duties to shareholders, but it would be a mistake—I underline the fact that it would be a mistake from the point of view of those who care about trade justice as well as shareholders—to dilute that clarity. Let us remember that we are all shareholders now—by our pension funds, if not directly—and participating in the practice of enlightened shareholder value is the way to work as citizens. Creating confusion about who directors are accountable to—as my right hon. Friend the Secretary of State rightly said earlier, being responsible to everyone is being responsible to no one—will not help the interests of trade justice. Securing international agreement and making progress on the Doha round are the right ways for the Government to move. I am particularly disappointed by today’s letter because the point has been explained to campaigning organisations. Indeed, I had the unique experience of participating in a debate in St. Mary le Bow, a church with two pulpits. I am not sure what happens when sermons are given—perhaps two approaches are debated—but I had the opportunity of speaking from one pulpit while the Trade Justice Movement spoke from the other. The key point is that it is like muddling up a piece of legislation about a vehicle such as a car—or in this case, a company—with legislation about a journey, the map, the purpose and where one wants to get to by using that vehicle. To put it another way, a company and its directors have responsibilities to employees. They fall, in general terms, within the range of responsibilities that they have to consider as directors, but placing specific responsibilities on them should not be done through a companies Bill, but through employment law or health and safety at work legislation. To take another example that the voluntary organisations should well understand, enacting a charities Bill is a way of dealing with the vehicle and trying to ensure its roadworthiness. If requirements about child protection, animal welfare or cancer research were built into such a charities Bill, everyone would understand that that meant losing all sense of the distinction between legislation about the vehicle and legislation about a series of specific policy issues—the sort of destination a charity might wish to pursue and would specify in its constitution, but not something that should be placed in charities law. With respect to those in the Trade Justice Movement, such an approach is neither sensible nor democratic, because the Bill is designed to ensure that there is accountability to company shareholders. The Bill introduces a major reform of company law: it makes it clear that the company’s directors must consider its long-term viability—the future interest of shareholders—rather being under an imperative just to make a quick buck. In running the company for the long-term benefit of the shareholders, the directors must have regard to factors such as the impact on employees, the environment and so on and report on the wider context of the business review. I believe very strongly that that is the right approach to take. Trade justice issues are so important to me that the only campaign event that I organised during the period before last general election was on trade justice, under the title ““Poverty is Political””, but I have always stressed that there are three ways in which citizens can campaign for trade justice: first, by pressing MPs and Ministers, as electors and constituents. Indeed, the Trade Justice Movement has been very grown up and effective in the way that it has done that in recent years, and it has affected and strengthened Britain’s hand in the world as a result. Secondly, people can influence companies as shareholders. The Bill will help to provide the right environment by creating a long-term context for a company’s decisions and enabling shareholders to play a greater role in holding directors to account. Thirdly, people can influence companies by buying fairly traded products and influencing the thinking of companies as consumers. Incidentally, in that context, I commend the House authorities for the way in which fairly traded products are made available in our canteens. Those in the Trade Justice Movement should welcome the Bill without amendment. They should certainly raise the issues that they are raising in a mature way but not pursue the amendments that would weaken the cause of trade justice. The Government have rightly sought to promote business, and that means promoting enterprise, so we need to make it easier for people to set up a company. Let us consider the statistics. We are told that, if we had the same number of women running companies in this country as in the United States of America, we would have 750,000 more companies than we have at present. Let us consider the need to promote youth enterprise. Great success has been achieved with enterprise week and a number of other recent initiatives. Let us consider social enterprise, which has a developing place in our economy and makes extremely constructive social and business contributions. I very much welcome the changes made in another place to protect companies and their shareholders against spurious derivative actions, while ensuring that genuine challenges on good grounds by shareholders can proceed. The Bill is about nurturing good practice and enabling Britain to go on being the best place to do business and increasingly the best place to set up a company. The Bill will provide good practice and a sound basis for the future, and I commend it to the House.