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Company Law Reform Bill [Lords]

I agree with my hon. Friend, and, indeed, that will be the burden of some of my later remarks. Looking at the third principle, that directors should be obliged to take steps to minimise the harm that companies may cause in local communities and environments, we can see that good practice established in the UK is an example for companies working overseas as well. The point, of course, is that those principles apply to companies working in the UK as well as to companies working in the developing world. Much of the debate has been focused on companies working in that context, but today I would like to address that last point with particular reference to a company working in my constituency: Friction Dynamex. The company has been in dispute with its workers since before I was elected in 2001. It is the longest running dispute in Welsh industrial history. I want to refer briefly to the review of company law instituted by the Government and to points made in the research paper provided by the House of Commons Library. The paper notes that there is a view that the interests of a company are to be equated exclusively with the interests of its members and that that can lead to a focus on the short-term financial bottom line rather than to enlightened shareholders building a long-term relationship based on trust. There are those two contrasting views. The steering group states that:"““directors should adopt the broader and longer-term (‘inclusive’) view of their role””" and that directors are currently obliged by law"““honestly to take account of the considerations which contribute to the success of the enterprise.””" So that, as the law stands, directors should not be looking to focus solely on the ruthless pursuit of short-term gains. That is what the steering group says, but as the House of Commons Library notes"““the DTI acknowledges that this interpretation is not deep rooted in the mainstream of company life.””" That is to say that the attitude that we want to promote is not deep rooted in the mainstream of company life. I would argue that that is perfectly illustrated by the case of Friction Dynamex in my constituency. I do not intend to go into any detailed history, given that time is short. I will say only that what began as short strike—as a last resort taken by workers in the face of an unreasonable management and intransigent employer—became a lockout and, more, an assault on the whole community and an offence to the community. The Friction Dynamex workers were reluctant to strike. Many of them had been employed since the ’60s. They did not strike to improve their wages or conditions, but to defend those wages and conditions in the face of an employer who wanted to reduce their wages. Initially, he wanted to freeze their wages and for four years they put up with that. Then he wanted to cut their pay. They would not relent on that point. He wanted a change in working practices and to divide and rule the work force. He wanted to choose whom he could dismiss. He dismissed people very carefully to his own advantage. That was a determined attempt on his part to squeeze whatever value he could get out of the plant and its workers. The workers wanted to negotiate, but he did not want to negotiate with them. As I said, he eventually locked them out. After two years of waiting, the workers won an industrial tribunal. The employer was proved to have acted unfairly. He appealed, but withdrew his appeal. In the meantime, he reorganised his business and suddenly found that Friction Dynamex had to be put in the hands of the administrator, because, apparently, it suddenly had £8 million of debts. The employer has subsequently—let me use the term ““reorganised”” again—reorganised his business a number of times. He has shed the name and adopted new names, but has not succeeded in shedding his liabilities. He remains, in effect, in charge of the business and, a couple of months ago, he sacked his current work force and recruited a new lot. When the strike started 130 people worked at the company; he is now down to 24. It is interesting that, under clause 364, that company would be defined as a small company and that it would not be subject to the provisions in clause 399 about doing a business review in the first place. The point about the unpleasant and, in terms of the employer’s behaviour, quite squalid case of Friction Dynamex is that the broader view of the responsibilities of directors has not prevailed as the law stands now. As a consequence, a number of things have happened. The taxpayer has lost the £1 million of public investment that went into the company initially. The local community has seen the loss of about 100 good jobs—jobs that are not usually available locally. A site uniquely placed on the banks of the Menai straits, which could be redeveloped into a site for new businesses, is tied up in an enterprise that, to be kind, has now run its course. There are, of course, consequences for the workers in the case. They have been locked out and they have lost their jobs. They won their case at the tribunal, but they still have not been compensated after five years of disputes. They have seen their employer take on other workers from the jobcentre to take the jobs that they wanted to do and were perfectly willing to do until they were locked out. Hon. Members should remember that this was not a dispute about higher pay. They have had their morale stretched to the extreme limits. Unsurprisingly, many of them who supported Labour in the election in 1997 no longer do so. I have gone into the case in some detail because it is a case that calls out eloquently for justice for this group of workers, who have conducted themselves with dignity in what we can rightly call a heroic struggle. They have been supported by people locally in Caernarfon and Bangor in Wales and in the UK, and by people throughout the world who understand the meaning of justice for workers. However, that is not all. Most UK companies take a serious and responsible view of their environmental and social responsibilities, but the case of Friction Dynamex shows us clearly why company law must be changed so that Mr. Smith, the owner, and his like can no longer put their own narrow short-term interests first, middle and last. That is the intention of clause 158, but I fear that Mr. Smith would laugh at clause 158. He would laugh at the voluntary approach. He would agree with it in its entirety and he would tick the boxes. Would he be caught by clause 158? I have my doubts and for that reason, I think that the Bill needs to be amended.