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Companies Bill [Lords]

I thank the hon. Gentleman for raising that important point. The dominant market position that certain companies secure in their own sector could be used to the disadvantage of those further down the supply chain, often smaller companies living hand to mouth. Anyone who, like me, seems unable to sleep the night through and listens to ““Farming Today””, an excellent programme at 5.45 am on the BBC, will regularly hear farmers speaking anonymously. I never thought I would be an advocate for the farming community, but it is interesting to hear people further down the supply chain objecting to the techniques being used by the retail sector—by the large supermarkets—to drive down the conditions in which their suppliers are working. We know that many companies are moving their production overseas. Several clothing factories have closed in my constituency. The company that owned the factory remains and continues to supply retailers, but the production has moved overseas, largely to take advantage of what the company would regard as favourable labour conditions overseas, which probably means poverty wages and extremely poor contractual standards in respect of employment law. If we were to secure a more balanced relationship in the supply chain, with longer-term relationships and more balanced ones too, that would benefit not only the rest of society and the work force, but the larger companies, which would reveal the suppliers of materials to them. In the long term business should operate through secure relationships down the supply chain. That would obviously create a good business environment. I said earlier that the cries of outrage in many of the newspapers this morning sounded somewhat phoney. I notice that the much lamented operating and financial review, which some months ago got lost somewhere along the line, included supply chain issues. Many companies that belong to the CBI and are part of the corporate world had already begun to include supply chain issues—stronger issues than my right hon. Friend the Minister is proposing. The CBI should not be expressing outrage at such a modest proposal. Many in the corporate sector had already adapted to it, and it would create more harmonious economic relationships down the supply chain. There is a third issue in the new clause—materiality, which I shall try to explain. The business review requires directors to report to shareholders on matters that are directly material to the company’s narrow financial health. It is accepted that companies seek to maximise the return to their shareholders, and that that is how the system works. However, it is possible to take a slightly longer-term view than the return of profit in the here and now. A company’s actions in the medium to longer term could be damaging to the company itself. An example is oil production in the Niger delta, which I mentioned a few moments ago. In the end, if the company continues to break Nigerian law, damage the local environment and exploit local people, it will not be in the company’s interests. Eventually, Nigeria will turn against the company. New clause 1 suggests a more relaxed version of materiality—what is material to the company’s operation—than the version in the Bill. It will be interesting to hear the Government’s arguments for suggesting such a narrow definition, rather than a slightly wider one. I have tried to provide a philosophical explanation of the current position and the Bill, which I warmly welcome, and to suggest how, without changing the world fundamentally, the Government might move the business review forward. Shareholders are unable to judge what is in the interests of the company if the business review is not made available to them. I would argue for a wider definition of that group. I began my comments by referring to the right hon. Member for Witney and quoting some of his comments, which I found amusing. I shall conclude with his remarks to The Sunday Times on 7 May. He said:"““I’m not prepared to turn a blind eye if the system sometimes leaves casualties in its wake.””" He went on to say:"““Unless shortcomings are addressed, the entire system risks falling into disrepute.””" I rather think he is speaking about capitalism. It is not a word or a concept that we often use in this place. For the moment at least, we are not challenging the entire capitalist system.