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Companies Bill [Lords]

Unlike many hon. Members present, I was not fortunate enough to serve on the Standing Committee, but I should like to speak to new clause 4 and amendment No. 2, tabled by my hon. Friend the Member for Bedford (Patrick Hall) and myself. Just over a year ago, I tabled an early-day motion, which was signed by more than 220 hon. Members, setting out why company law needed to be modernised for the 21st century. I warmly welcome the Bill, particularly the fact that it clearly states the Government’s position with regard to enlightened shareholder value. That clarity seems to be sadly missing from the Conservatives’ approach; I am sure that that will not go unnoticed. I tabled the amendments in the hope that we could go a little further. New clause 4 proposes a positive duty for company directors to take responsibility for the impacts and interests of their companies in the round by endeavouring to minimise adverse impacts on the community and the environment, promoting the interests of employees, and maintaining high ethical and business standards. That is merely what we have a right to expect of our companies as responsible members of the global community. Modernising company directors’ duties in that way would give them a clear incentive proactively to consider the impact of their business operations on their employees and suppliers and on the companies and environment they rely on. By empowering directors to take their responsibilities seriously, we would give room for our companies’ huge energy and innovation in terms of delivering unprecedented social and environmental benefits. By making it a clear and positive duty, we would provide an incentive for those directors who do not take their responsibilities seriously to think again. I am a Labour and Co-operative MP. For the co-operative movement, corporate social responsibility is integral to doing business, and always has been. However, it should not only be the concern of co-operatives and social enterprises. It is in the long-term interests of the economy and of society as a whole—and in the interests of the long-term success of companies themselves—that all businesses operate in a responsible and sustainable way. I support the efforts that the Government have made to encourage responsible business practices, including through the promotion of business education and best practice in CSR. The Bill, particularly through the codification of directors’ duties, addresses a fundamental premise. Should a company operate only in the interests of its members—its shareholders—or should it have a wider remit and operate in the interests of stakeholders? If we accept that, as I do, how should we manage it—by legislation, regulation or voluntary code? That goes to the heart of the matter. In my view, as I said on Second Reading, it is no longer acceptable for financial profit to be the only motivating factor in doing business. Many businesses already acknowledge a wider responsibility to consider the interests of employees and the impacts on the local community of doing business—the essence of what we say is CSR. Regrettably, though, despite an increasing number of commitments by companies to a more responsible way of doing business, we have evidence that there are still far too many failures to deliver. As my hon. Friend the Member for Bedford noted, the amendment is supported by members of the Trade Justice Movement and the Corporate Responsibility Coalition. Like most hon. Members here, I have received an enormous number of postcards, letters and representations on this. Many of these organisations have compiled large bodies of evidence detailing the failure of a purely voluntary approach to CSR. When I spoke back in June on Second Reading, I said that The Times had uncovered allegations that Portuguese children as young as 11 were being paid just $20 a day to make shoes for the clothing chain, Zara. It is therefore with a sense of déjà vu, as well as concern, that I note Channel 4’s recent story alleging that factories in Bangladesh that produce clothing for Tesco have employed children as young as 12. ActionAid has also exposed Tesco for paying poverty wages and failing to observe basic health and safety standards in the use of pesticides. Tesco is a market leader—a competitive business that recently announced record profits. Many consider it to be a leader in corporate social responsibility, but it obviously continues to fail to deliver that completely. Tesco is not a lone case. Shell is another successful company, which has been at the forefront of promoting the idea of corporate social responsibility, but the social and environmental problems that its activities in Nigeria caused first came to the world’s attention in 1995. Christian Aid and Friends of the Earth recently produced reports that show that communities and the environment in the Niger delta suffer because of oil spills, gas flaring and other activities that Shell causes.