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Company Law Reform Bill [Lords]

I hope that the right hon. Gentleman whose party, as we have seen in tonight’s debate, voted against the OFR, will help us to consider the components of the business review so that we can meet the objectives of enhanced shareholder value. Some people, including the right hon. Gentleman, believe that we should have adopted a more pluralist approach instead of one based on enlightened shareholder value. We all share the goals of marrying commercial prosperity with long-term sustainability. The real debate on the Bill concerns how we can best achieve those goals. The provisions on directors’ duties, together with the provisions on narrative reporting, will give a huge boost to our corporate social responsibility agenda. If we went further, we would damage our success in attracting companies to incorporate in Britain, along with the economic growth and jobs that that brings. In a global economic environment with global markets, companies can choose where they wish to incorporate their business, so company law must focus on its core purpose to create the right environment for business success. Company directors require clarity about their duties. While we accept that long-term business success partly depends on employee interests, communities and the environment, we must accept, too, that company law is not the best vehicle to address wider social and environmental objectives. We can address those objectives, as some Government Members have said, through domestic legislation, health and safety measures and environmental protection, on which we have made progress. We can drive our agenda forward through the EU. Organisation for Economic Co-operation and Development guidelines for multinational companies, the extractive industry transparency initiative, which the Prime Minister launched in 2002, the partnerships that have developed on natural habitat loss, and the round table on sustainable palm oil are all examples of initiatives that ensure sustainable best practice in the global environment. Finally, we should remember that, as consumers, we all have power to change cultures. Laws are not always the best way for us to achieve cultural change. My hon. Friend the Member for South Swindon asked whether we would strengthen our commitment to corporate social responsibility. Guidance will be developed on the quality and coverage of the business review and all UK companies will be accountable in that they will have to fulfil their duties under both clauses. They will therefore have to report clearly on how the action that they have taken impacts on issues such as the environment. If they fail to include that in their report, they will have to explain why.