Public Limited Companies (Financial Regulation)

Part of the debate – in Westminster Hall at 2:30 pm on 13th March 2003.

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Photo of John McFall John McFall Chair, Treasury Committee 2:30 pm, 13th March 2003

I cannot fully understand what the hon. Gentleman is saying, but I shall be happy to listen to him at a later date. His intervention raises this fundamental question: who owns companies? It is not the chairman or the chief executive; thousands of us indirectly own companies through our pension funds and savings.

Many years ago, people were appointed, not elected, to Parliament. They did not fancy having people come in and question them in public. Now questioning is a natural part of our disposition. We are questioned on everything because we are elected by thousands of people who have a link with us. The same is true of companies. Thousands of us indirectly own those companies, and it is correct for chairmen and chief executives to open channels with shareholders.

As for non-executive directors, I would not take such a post unless I had access to independent advice to balance the advice that the chief executive and chairman gave me. The chief executive, the chairman and I would want to arrive at the same end point, but perhaps we would have different starting points. Increased scrutiny and transparency are extremely important.

We need to find more non-executive directors because we have been bad at finding good ones. When I looked up the statistics on non-executive directors, I found that more than half of them never receive a formal appraisal of their work. When they were asked, more than two thirds said that they would want such an appraisal. Half the current non-executives were recruited through friendship rather than assessment, which means that we have not got it right. When only 4 per cent. of them have had a formal interview, there is a long way to go on the other 96 per cent.