The Company Law Reform Bill that was introduced in the House of Lords has since morphed into the Companies Bill as it progressed through the House of Commons committee stage. This reflected the interest and debate on the level of regulation imposed on business within the UK. What started as a reforming Bill ended up as the longest Bill ever to pass through Parliament with more than 1400 amendments. Ironic, really, for a measure designed to slash bureaucracy.
There has been a continuous battle between those who want everything corporate to be tightly regulated leash by Whitehall and laissez-faire free marketeers. But, as usual, the majority seek to find equilibrium in the middle. Business regulations have undoubtedly increased in the last nine years and business taxes are on the march as the Chancellor steers clear of overturning Middle England’s applecart.
I agree with the general thrust of the Bill in reducing red tape but have some concerns with three areas in particular. One clause lays down in some detail the duties expected of a company director. A definitive list of duties runs the real risk of being too proscriptive and inappropriate. How does the role of a director differ from a corner shop owner to that of a multinational executive? Though I do not in any way begrudge accountants and lawyers their living, I would prefer them to be able to earn this in wealth creation for their clients rather than protection from the creeping clutches of the State.
I support Shareholders’ Rights Alliance’s campaign to ensure that shareholders within a nominee account have the same rights as those with a physical share certificate. As well as righting a blatant inequality, this will help deal with my third concern: corporate social responsibility.
More and more individuals are investing in, and doing business with, companies that have a stated social and environmental policy. Ethical trusts, green fuel and Fairtrade products are becoming mainstream choices, not just expensive options attractive only to wealthier “early adopters”. This move benefits both our surroundings and neighbours, encouraging other organisations to look beyond traditional business models and appreciating that a social conscience is not mutually exclusive to profit.
Gordon Brown removed the requirement of companies to produce an operating and financial review on the grounds of cost savings. It is vital that provision is made in the bill for customers and shareholders to have access to substantive, accurate information on a company’s activities. David Cameron has set up an expert working group on corporate social responsibility to examine the ways in which this balance can be achieved. One area of interest is the introduction of lighter regulation for companies with formal responsible business practices. Over-regulation will force larger companies to relocate, leaving smaller businesses, less-able to cope with regulatory burdens. The problem will just move on, with the issue still remaining to be dealt with. Relocation of such companies can also decimate communities leaving a void behind, which can take years to fill. The near-destruction of the British motor industry has given rise to a series of smaller hi-tech companies to absorb much of the workforce but this did not happen overnight and it did not happen everywhere. Foreign companies will be unaffected by this legislation, so it will never transform the area of corporate social responsibility. Government must not be a regulator but a catalyst. It is the responsibility of legislators to protect the environment and our communities but, equally it is our responsibility to know when to stop tinkering.