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Companies Bill [Lords]

That is an important point, and good businesses do approach such matters in that way. What we are trying to create through the Bill, perhaps as amended, is a level playing field to ensure that they are not disadvantaged for giving emphasis to these important matters. I emphasise that what I am proposing would not change the current position that the overriding duty is to promote the success of the company, but it places the six duties that articulate the essence of enlightened shareholder value at the heart of company law, which has never been the case before. The measure would thus place those desirable objectives firmly on the agenda. I am not convinced that merely having regard to them would suffice, but we shall see. Being positive about the duties is a pro-business position that helps to create a level playing field underpinning the good practice to which the hon. Member for Angus (Mr. Weir) referred. There is much good practice around, so why not support it in company law? Good companies already do many of the things listed in clause 173, so if those duties are set out in law, and especially if they are strengthened as proposed in new clause 4, it will encourage directors to be proactive, rather than passive, about the long-term impact of their business operations on employees, communities, suppliers and the environment. That would support directors who provide the leadership to take such a route, and why should that not be so? Who would not want it to be so? I suggest that they would be the directors who are irresponsible, short-sighted and too lacking in imagination to see the business case for a more progressive approach. Much was made in Committee by several hon. Members who suggested that the position I am advancing would open opportunities for litigation and thus increase insurance costs, and they will be able to make their points today. However, the hon. Member for Cambridge (David Howarth) pointed out several times in Committee that suing a director or a board for not fulfilling all or some of the additional six secondary duties will be limited to few classes of people: the board as a whole, a super-majority of shareholders, liquidators acting on behalf of an insolvent company and a new board during a takeover. A minority of shareholders could bring a derivative action, although the Bill closes that option to a very limited number of cases because such action would have to be subject to ratification by the majority of shareholders. However, we should not forget that none of those classes of people could sue for a loss to the company unless they could demonstrate that there was a loss due solely to a breach of one or more of the six duties. When applying any of the duties that we care to think of—whether they are the six secondary duties listed in clause 173, the other seven outlined as general duties in chapter 2 of part 10, or several in an amazing list of 640 or so duties, the existence of which the hon. Member for Huntingdon (Mr. Djanogly) repeatedly mentioned in Committee—directors are expected to act in good faith, to exercise reasonable care, skill and diligence, and to do what is most likely to promote the success of the company for the benefit of its members as a whole. Suing a company director is difficult enough already, so attacking new clause 4 on the basis that it would make such action more likely is not a credible argument. On the contrary—I accept that this is at the margins—the measure would help to protect directors who took responsible and long-term decisions and strengthen the hand of shareholders who wished to challenge directors who did not do that. The power to challenge such directors would come not from new clause 4 or clause 173, but elsewhere, because it is already well established in law.