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Company Law Reform Bill [Lords]

I will try to be brief because it is getting late and several other hon. Members wish to speak. I declare an interest as a director of a very small private company, Infrastructure Capital Partners, and a very small public company, Specialty Scanners plc. I do not think that that greatly influences what I will say. Liberal Democrats are concerned that businesses should be held to account by their shareholders for not only their financial performance, but their impact on the community and the environment. There is also a broader—although perhaps lesser—public interest in transparency. We have thus welcomed any moves towards new forms of corporate reporting that would achieve those goals, so we were excited by, and supportive of, the whole concept of the operating and financial review that the Department of Trade and Industry promulgated in detail in 2004. We were as stunned as everyone else when the consultation was withdrawn by the Chancellor in November 2005. It is important that we use every opportunity during the passage of the Bill to press the Government to look again at the measures on business reviews in clause 399 and consider whether there would be only gain and no loss by strengthening the provisions, in effect to pick up the various abandoned parts of the OFR. At the beginning of the debate, the Secretary of State most graciously let me intervene. I picked up on the issue of prospective investors and their interest in access to information on the environment, the community and social impacts that the operation and finance review offered. I think that the hon. Member for Eddisbury (Mr. O'Brien) quoted from a DTI press release issued back in 2004 by the hon. Member for Leicester, East (Keith Vaz). It talked about the OFR improving the quality of reporting and ““completing the corporate jigsaw””—that was the phrase that he repeated—to give investors a clearer picture. A paragraph continues—I shall not bore the House with it—that essentially repeats that sentiment, constantly stressing the importance of the OFR to investors in understanding the picture of the companies in which they might choose to invest and support, and the importance of the dialogue that ensures between investors and business with these disclosures. I was able to quote back to the Secretary of State the words of Lord Sainsbury of Turville, who was speaking for the Government in the other place. He essentially dismissed those principles of providing information to potential investors on a much wider range of issues. We constantly hear the Government call for people to invest more and to save more. It is a call that is directed especially to younger people. When I spend time with younger people and with people of my generation—I am thinking of my own grown children—they are deterred from investing because they do not understand the efficacy of the corporations in which they might invest, in their daily practices and operations. If we want to bring the younger generation in, we must respond to what they are asking us to do, which is to ensure that there is full and reasonable disclosure. That is not too high a standard to set before the Government. At the beginning of the debate, the Secretary of State seemed to give the impression that the business review was almost everything that the OFR was, bar a few technicalities and costs—a little extra on the reporting requirement and a little more auditing—and so not really very different. I read in the Bill something that is fundamentally different. There is no basic accounting standard. How can anyone compare one company with another without a common language and a common standard around which to work? I do not think that it is reasonable to ask someone to do that. There is the light touch of audit on statements. Under the business review, any requirement has now been removed for auditors to check for inconsistencies between the business review and the reality. To me, that matters. The best companies will continue to provide full and accurate information, but if anyone wishes to be slack or inconsistent, there seems to be a door through which they can charge. I am sad to say that the business review will have attached to it the words ““caveat emptor””. That is exactly what we do not seek. Instead, we want certainty, clarity and absence of ambiguity. There are a few other issues that I want to raise on the business review. There is no reference to the supply chain. Two years ago, I was in New Zealand at a conference on sustainable development. One of the main speakers was from B&Q, I think from strategic planning. He talked of an experience that the company had had. It had been challenged by NGOs on the ground that—I do not want to swear by this—the company had been supplying furniture that had been made from wood from endangered forests. I think that it was teak from inappropriate sources. That caused the company to look at its supply chain. It was horrified with what it found. The company committed itself to examine every aspect of the supply chain, including its contractors. It found that it did not know who its contractors were when it started the examination. It examined where it was sourcing from and how workers were treated. It examined what standards were used in the workshops. At first, it thought that there would be a huge cost on the company, to be offset by a gain in reputation. We were told at the conference that the benefit was found in better suppliers and better sources. The company had workers employed by their various contractors. They were being properly employed and properly treated in much healthier conditions. The company’s financial bottom line improved because of that chain in practice. What struck me more than anything else was that the company did not know what its situation was until it was forced by an outside event to go and explore. I am worried by the absence of the supply chain within the business review. Without that forcing element, companies will not go back, do the homework, discover what the situation is, confront it and finally deal with it. The opportunity is provided by the Bill to achieve that.