Performance of Companies and Government Departments (Reporting) Bill

Part of the debate – in the House of Commons at 2:10 pm on 30th January 2004.

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Photo of Mike O'Brien Mike O'Brien Minister of State (Trade), Department of Trade and Industry, Minister of State (Trade), Foreign & Commonwealth Office 2:10 pm, 30th January 2004

On the timetable for producing and consulting on the draft regulations, it would probably be best if I got some details from my right hon. Friend the Minister for Industry and the Regions. I shall write to my hon. Friend Mr. Dismore, the Liberal Democrats and the Opposition so that they have some idea of when we shall introduce the regulations. We have the Bill and the regulations, so many issues still require consultation.

My hon. Friend the Member for Rugby and Kenilworth kindly noted that the provisions on directors' duties relate closely to the clauses in the review. We are grateful to those in the CORE coalition, who commented on the drafts. That has led us to conclude that several essentially technical improvements should be made. We shall consult on them in due course. The clauses also help to answer one of the most important questions in company law: in whose interests a company should be run.

The company law review considered the matter in detail and consulted on it on several occasions. It recognised, as I do, that many argue that a company should be required to serve a wider range of interests beyond simply those of the shareholders. Such a pluralist approach inevitably involves balancing potentially conflicting interests. Mr. Forth mentioned that and the way in which the various balancing interests would need to be resolved by a company director answering the question that the measure proposes. We need more detailed examination of how a director could consider all those issues. The right hon. Gentleman appears to be itching to jump out of his seat. I should hate to disappoint him by allowing him to do that. However, it might be helpful if I gave him an example of the approach and perhaps he could intervene subsequently.

Let us suppose that a group of directors is considering which of two factories to expand. I hope that we all agree that they should take a wide range of factors into account. They could include the availability of a work force for each site, which site would best meet the customers' needs, the impact on the two different communities and on the environment and so on. Let us suppose that the group's evaluation shows that expanding on site A would produce 100 additional jobs in an area of high unemployment, when there is essentially full employment at site B. However, let us further suppose that the impact on suppliers of expanding on site A is slightly greater than that of expanding on site B. How do the directors decide whether creating 100 additional jobs in an area of high unemployment is worth the marginally greater impact on their suppliers? They would need some form of common measure to enable them to strike a balance, as the right hon. Member for Bromley and Chislehurst suggested earlier. I should like to make it clear that the Government reject any suggestion that this should involve the view only of the directors looking after the short-term interests of shareholders' profits. There needs to be a wider test. We need a more practical and inclusive solution, involving what the company law review described as enlightened shareholder value. And on the issue of enlightened shareholder values, I give way to the right hon. Member for Bromley and Chislehurst.