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Companies Bill [Lords]

My right hon. Friend puts his point strongly. As I said at the outset, the Government are trying to dig themselves out of a hole by means of the clause. There is no point in the Minister asking me ““yes or no”” questions because the matter is rather more complicated and sophisticated than that. I shall come to the Conservatives’ viewpoint in terms of corporate social responsibility, if she will only give me a chance. If we look at where the pressures are coming from, we can see from its briefings that the TUC supports codification and makes an explicit link between the success of the company, the interests of employees and the other matters for consideration listed in the clause, and makes it clear that directors should have regard to these matters. The TUC sees that link as a significant step and wants clear and comprehensive guidance and reporting, which it sees as contributing to raising standards of corporate behaviour. How does a significant step not constitute a change? The Minister must come to terms with that anomaly in her position. Our party supports many of the good intentions voiced by the Government when they talk about enlightened shareholder value. We have no problem with any of the individual items listed in clause 173, as I made clear to the hon. Member for Bedford in my intervention. For the most part, they exist as common law responsibilities in current law. However, in the context of sound law, these intentions can easily slip into platitudes, and that view is reflected by many commentators on the Bill. The Association of British Insurers supports the enlightened shareholder value approach, but says:"““We have nevertheless had concerns that codification might lead to a compliance driven approach to the exercise of directors’ duties rather than one based on the making of good-faith judgements. This could lead directors to take expensive and time-consuming legal advice, impair efficient decision making and add an unnecessary layer of bureaucracy to board practices. Codification of directors’ duties would not then achieve its goal of greater transparency and accountability, but instead create new uncertainties and larger administrative burden.””" The Law Society says that it"““doubts that the savings for business which the government anticipates will be achieved. On the contrary, the new provisions on directors’ duties will result in new uncertainty, increased legal costs and additional bureaucracy…In particular, the Law Society believes that the new code is inflexible—at present, the courts have considerable freedom to develop the law on directors’ duties to suit changing needs and expectations and in practice the code will not be more accessible than common law rules, as its meaning will over time become less and less clear to a reader who does not also understand how it has been interpreted and applied by the courts.””" It is very clear that while the Government protest that they are not changing the common law position, they are doing just that—a course that will lead only to confusion where there should be clarity. But also, and in some ways even less helpfully, the clause could impede the future development of the common law, which is a very developed area in this country compared with many other jurisdictions. The list of the six factors to which a director must have regard as set out in clause 173 seems arbitrary. It has been calculated that some 650 common law duties of directors have been laid down through the common law and various statutes over the years, and in Committee, as the hon. Member for Bedford mentioned, I set out quite a number of those. Why have the six in the Bill been deemed more important than all of the others? We recognise that putting the duties into one format would give clarity to company directors. That is why we have supported, in amendment No. 398, the Law Society’s proposal to publish a non-statutory guide to directors’ duties.